UK energy regulator Ofgem has proposed new minimum capital requirements for domestic energy suppliers in a bid to boost financial resilience.

Following a consultation, the regulator plans to introduce a capital floor of £0 adjusted net assets per customer from 31st March 2025 and a capital target equivalent to £130 adjusted net assets per dual fuel customer from the same date.

Suppliers not meeting the capital target will be required to submit a capitalisation plan showing how they will do so and will be subject to transition controls until an acceptable plan is in place.

The proposals will be subject to further statutory consultation.

Ofgem is also requesting feedback on their revised plan to introduce powers to ringfence customer credit balances (CCBs) by direction.

The proposal includes updates to the data triggers that would determine if it is necessary to direct ringfencing of CCBs.

This involves setting a capital target and requiring suppliers to hold cash balances equal to or greater than 20% of gross CCBs, minus unbilled consumption held by domestic fixed direct debit customers, which will serve as a trigger threshold for CCBs.

Article source: https://www.energylivenews.com/2023/04/06/ofgems-proposal-to-shock-proof-energy-suppliers-with-minimum-capital-requirement/