Delta Gas and Power has been banned from acquiring new customers after failing to demonstrate it is financially responsible during stress testing by Ofgem.
It comes as the regulator revealed it is preparing to issue a statutory consultation later this month on proposed licence modifications designed to further strengthen supplier financial resilience.
Last month Delta was issued with a final order over its failure to pay more than £530,000 in Renewables Obligation (RO) payments.
Announcing Delta had also been slapped with a provisional order, Ofgem explained the move followed a stress test issued to all non-domestic suppliers which required them to provide information relating to their financial resilience.
The regulator said that Delta, which supplies just shy of 1,700 customers, failed to demonstrate it is meeting Ofgem’s Operational Capability and Financial Responsibility principles.
Specifically Delta provided forecasts which “demonstrated a weak cash flow and funding position”. Ofgem said the forecasts contained errors and did not seem achievable in practice.
Furthermore, the regulator raised concerns that Delta does not appear to have hedged sufficiently.
The order stipulates Delta must, by 5 December, take steps to improve its operational capability to ensure it can respond “accurately and on time” to any requests for information from Ofgem in relation to its financial position.
It must also improve its financial position to ensure it can “operate effectively under low, central and high financial stress test scenarios” set out in the Stress Testing RFI.
Additionally the supplier must provide the regulator with a report, accompanied with supporting evidence, no later than 5pm on 7 December to confirm it has complied.
Ofgem said the provisional order is in place until 7 February next year. Until the terms of the order are met, Delta is banned from all sales, marketing and customer acquisition activity and must not upgrade existing customers to dual fuel.
It must also refrain from making any payment, providing any loan or transferring any asset to any third party unless this is a legal requirement and the payment is approved in writing by Ofgem, is essential to Delta’s operation as a supplier or is otherwise approved in writing by Ofgem.
Cathryn Scott, Ofgem’s director for enforcement and emerging issues, said: “Our robust risk assessments examine a supplier’s ability to provide customers with an essential service like energy and we have concerns about Delta’s finances.
“We regularly monitor suppliers’ compliance with financial resilience, operational and customer service obligations. Where suppliers do not comply with these obligations, we will not hesitate to take action.”