New energy companies face tougher tests to reduce failures

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Smaller energy suppliers hoping to break into the market will have to pass tougher tests, following a string of company collapses.

Regulator Ofgem said it was raising the bar to entry to “minimise the impact” of supplier failure on consumers.

Firms will have to prove they have sufficient funding and can provide proper customer service.

Over the past six months 11 small energy firms have failed, including Brilliant Energy, Our Power and Gen4U.

The new tests will be rolled out from June.

Ofgem’s executive director of consumers and markets Mary Starks said the aim was to “protect consumers while also ensuring they enjoy the benefits of increased competition and innovation that successful new firms entering the market bring”.

“Applying new requirements on suppliers entering and operating in the market will aid us to weed out those that are underprepared, under-resourced and unfit. This will help minimise the risk of supplier failure and help drive up standards for consumers.