Ofgem should be using all reasonable measures to make sure companies do not exit the market with debt and cause mutualisation to be triggered, the chief executive of Good Energy has said.
Juliet Davenport was speaking in response to the publication of a series of proposals by Ofgem to introduce new checks on suppliers to create more accountability in the market and to require more “responsible and appropriate” behaviour.
Ofgem’s current proposals will mean a proportion of credit balances and government scheme costs will be protected (by a minimum of 50 per cent in the case of credit balances).
Mutualisation has been a point of concern among suppliers, as was evidenced when the process was triggered for the first time ever over unpaid renewables obligation (RO) payments last year.
Suppliers who had met their obligation were required to fill the gap and cover the relevant shortfall.
Speaking to Utility Week, Davenport said: “I do have a problem with having to put any cash down as an organisation.
“What is going to happen is anyone with a credit rating won’t have to, so you advantage the big six again.
“Any small supplier like ourselves, who is behaving properly, running a business properly and has done for the past 20 years, are suddenly having to pay for the fact that some people are either being unscrupulous or just incompetent.
“What I want to do is make sure Ofgem is using all reasonable other measures to make sure companies don’t exit with this debt in place.
“The only reason people don’t make payments on time under the RO is because they are either playing the market or they are incompetent.”
Davenport did however welcome some of Ofgem’s proposals, such as those to introduce an ongoing fit and proper requirement to ensure senior managers are subject to the appropriate checks, adding that each company should have non-executive directors on their boards to make sure senior members are doing their duties properly.
Also speaking to Utility Week was Mary Starks, Ofgem’s executive director of consumers and markets, who said the proposals introduced today will help the regulator act quicker when it sees issues with suppliers and minimise the costs that supplier failure imposes on others.
“We certainly see one of the impacts being reducing the level of mutualisation in future years”, she said.
Starks further clarified that while Ofgem’s preferred option was to protect a minimum of 50 per cent of credit balances, its view was not rigid and could be subject to change.
She added: “It is about striking the balance, about not making it prohibitively difficult to enter this market but trying to bring down the cost of mutualisation, it’s about striking that right balance and we are open to views as to whether we have got that balance right.”