UK's Ofgem proposes new rules to reduce supplier failure risk

Britain's energy market regulator Ofgem on Tuesday proposed new financial checks and tests for energy suppliers to try to reduce the risk of supplier failure.

LONDON, Oct 22 (Reuters) - Britain's energy market regulator Ofgem on Tuesday proposed new financial checks and tests for energy suppliers to try to reduce the risk of supplier failure.

The rules - which are under consultation until Dec. 3 - follow Ofgem's introduction of tougher entry requirements for new suppliers in July.

The rules would enable Ofgem to request independent audits of its existing suppliers' customer service operations and financial status and would be introduced for growing suppliers before they hit certain thresholds of customer numbers.

If a supplier failed a test, it would be stopped from taking new customers on.

The proposed changes are a response to increased competition in the retail market, which led to the situation in which "some suppliers may fail to keep up with the pace of more competitive firms", Ofgem said in a statement on Tuesday.

"The new proposals will create more accountability in the market, require more responsible and appropriate behaviour from suppliers in the market and reduce the risk and costs to consumers associated with supplier failure," Mary Starks, Ofgem's executive director of consumers and markets said.

Ofgem said that suppliers would have to make it clear what would happen in case of their failure, including likely costs and service disruptions.

If a supplier fails, it would be required to make arrangements to ensure it would be able to cover a proportion of customers' credit balances and government environmental scheme costs.

The proposed rules also include new requirements for suppliers that would ensure their senior management are fit to carry out their duties, as well as a new principle for suppliers to be cooperative with the regulator.

Following the consultation, Ofgem will publish the final decision on the proposed rules in spring 2020, with the launch of new policies expected in summer 2020, Ofgem's spokeswoman said.

(Reporting by Ekaterina Kravtsova; Editing by Alison Williams)

((Ekaterina.Kravtsova@thomsonreuters.com; +442075420980; Reuters Messaging: ekaterina.kravtsova.thomsonreuters.com@reuters.net))

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