Energy regulator Ofgem has laid out proposals which could see energy firms foot more of the bill from supplier failures themselves, in turn saving consumers from paying more.
Some 29 suppliers collapsed between mid-2021 and late 2022 at a cost of around £2.7 billion, which is said to have inflated household bills by an average of £94 each.
The remaining suppliers took on customers from collapsed firms to ensure continuity of supply and were allowed to hike bills under Ofgem’s price cap to recoup losses from such takeovers.
Under rules proposed by Ofgem on Friday, suppliers which collapse would be held liable for such costs, however, their assets would be sold off to cover these through normal insolvency proceedings.
“We’ve already brought in tough new rules to make suppliers more financially stable,” Ofgem markets general director Tim Jarvis said.
“[This] includes requiring suppliers to have their own capital at risk so that they can better withstand shocks.”
As it stands, Ofgem uses the price cap, which determines how much suppliers are allowed to charge for energy, to allow firms to recover emergency takeover costs by billing more.
Proposals have been made for such an increase in the cap in April, with the likes of British Gas and Eon having profited over the first half of last year on the back of such measures.
“If implemented, these new rules would go further towards shielding consumers from the impact of failures in the future,” Jarvis added.
“Shareholders would not be able to see any return from an insolvency process until the costs of keeping their customers on supply had been met.”