New rules for energy companies following billions spent on collapse of suppliers
The gas and electricity watchdog has announced a series of new rules for energy companies, including requiring firms to hold more capital, similar to the regulations placed on the banks in the wake of the financial crisis.
Ofgem has proposed the regulations to protect customers and make firms more resilient after a number of electricity suppliers went bust and cost taxpayers billions.
The collapse of electricity provider Bulb came after wholesale gas prices skyrocketed last year and left the company losing money on the energy they were contracted to sell to households and businesses at lower prices.
Its bailout is expected to be the biggest since the Royal Bank of Scotland was nationalised in the financial crisis and cost £6.5bn, according to forecasts from the Office of Budget Responsibility (OBR).
The Bulb insolvency is just one of dozens of smaller collapses which lead to criticism for the industry regulator Ofgem over how it allowed new energy companies in to the market.
Under the new rules announced on Friday, firms would be required to hold on to more cash or assets to reduce the risk of them going bust and reducing the cost and disruption if they do so.
Firms would also have to ringfence the money they needed to buy renewable energy in an effort to stamp out the misuse of customers’ credit balances, which will be closely monitored, Ofgem said.
The proposals have already come under fire from electricity suppliers, particularly the absence of a requirement for suppliers to ringfence all customer credit balances.
Customer money used to ‘fund day to day business activities’
British Gas owner Centrica issued stinging criticism for this omission and warned lessons have not been learned from the Bulb liquidation.
“When customers pay up front for their energy, they are trusting their supplier to look after their hard-earned money. They would be appalled to learn their money was being used to fund day to day business activities, but that’s exactly what’s happening in some companies, and it undermines confidence in the market,” Centrica chief executive Chris O’Shea said.
“We identified this as a major risk to consumers in 2016 – years before the energy crisis – and Ofgem promised to fix this.
“Energy companies must be adequately capitalised by their shareholders so that if they fail, the shareholders feel the pain, not UK consumers. It really is as simple as that, but it appears lessons have still not been learnt. This feels like an abdication of responsibility by a regulator not focusing on the right things. If and when a large supplier fails, the recklessness of the decision not to address this issue will be clear for all to see.”
Ofgem’s chief executive said there was a difficult balancing act to be done to ensure costumer protection while not placing undue restrictions on firms and hinder investment.
“These proposals will provide protections, checks and balances for consumers, suppliers and the entire sector to create a more stable market. We want suppliers to be able to be innovative and dynamic, while also making sure they are financially stable, and that customers’ money is protected,” Jonathan Brearley, Ofgem’s chief executive, said.
“This is a delicate balance and while Ofgem want well capitalised businesses that can weather price fluctuations, we also don’t want to block the market for new suppliers or force suppliers to sit on lots of capital they could be investing in innovative ideas.”
Feedback is being sought on the proposals and Ofgem expects reforms will be published by next spring.
The UK-US trade deal has been signed and is “done”, US President Donald Trump has said as he met Sir Keir Starmer at the G7 summit.
The US president told reporters: “We signed it, and it’s done. It’s a fair deal for both. It’ll produce a lot of jobs, a lot of income.”
As Mr Trump and his British counterpart exited a mountain lodge in the Canadian Rockies where the summit is being held, the US president held up a physical copy of the trade agreement to show reporters.
Several leaves of paper fell from the binding, and Mr Starmer quickly bent down to pick them up, saying: “A very important document.”
President Donald Trump drops papers as he meets with Britain’s Prime Minister Keir Starmer in Kananaskis, Canada. Pic: AP
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Sir Keir Starmer hastily collects the signed executive order documents from the ground and hands them back to the US president.
Sir Keir said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”
Mr Trump added that the UK was “very well protected” against any future tariffs, saying: “You know why? Because I like them”.
However, he did not say whether levies on British steel exports to the US would be set to 0%, saying “we’re gonna let you have that information in a little while”.
Sir Keir Starmer picks up paper from the UK-US trade deal after Donald Trump dropped it at the G7 summit. Pic: Reuters
Mr Trump also praised Sir Keir as a “great” prime minister, adding: “We’ve been talking about this deal for six years, and he’s done what they haven’t been able to do.”
He added: “We’re very longtime partners and allies and friends and we’ve become friends in a short period of time.
“He’s slightly more liberal than me to put it mildly… but we get along.”
Sir Keir added that “we make it work”.
The US president appeared to mistakenly refer to a “trade agreement with the European Union” at one point as he stood alongside the British prime minister.
Mr Trump announced his “Liberation Day” tariffs on countries in April. At the time, he announced 10% “reciprocal” rates on all UK exports – as well as separately announced 25% levies on cars and steel.
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In a joint televised phone call in May, Sir Keir and Mr Trump announced the UK and US had agreed on a trade deal – but added the details were being finalised.
Ahead of the G7 summit, the prime minister said he would meet Mr Trump for “one-on-one” talks, and added the agreement “really matters for the vital sectors that are safeguarded under our deal, and we’ve got to implement that”.
Poundland will halt rent payments at hundreds of its shops if a restructuring of the ailing discount retailer is approved by creditors later this summer.
Sky News has learnt that Poundland’s new owner, the investment firm Gordon Brothers, is proposing to halt all rent payments at so-called Category C shops across the country.
According to a letter sent to creditors in the last few days, roughly 250 shops have been classed as Category C sites, with rent payments “reduced to nil”.
Poundland will have the right to terminate leases with 30 days’ notice at roughly 70 of these loss-making stores – classed as C2 – after the restructuring plan is approved, and with 60 days’ notice at about 180 more C2 sites.
The plan also raises the prospect of landlords activating break clauses in their contracts at the earliest possible opportunity if they can secure alternative retail tenants.
In addition to the zero-rent proposal, hundreds of Poundland’s stores would see rent payments reduced by between 15% and 75% if the restructuring plan is approved.
The document leaves open the question of how many shops will ultimately close under its new owners.
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A convening hearing has been scheduled for next month, while a sanction hearing, at which creditors will vote on the plan, is due to occur on or around August 26, according to one source.
The discounter was sold last week for a nominal sum to Gordon Brothers, the former owner of Laura Ashley, amid mounting losses suffered by its Warsaw-listed owner, Pepco Group.
Poundland declined to comment.
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