Ofgem unveils £350m scheme to support struggling energy suppliers
Ofgem has today unveiled a £350m scheme to support struggling energy suppliers which do not possess an investment grade credit rating.
As a result of the coronavirus crisis, many households have defaulted on the payment of energy bills, which has heaped pressure of electricity and gas suppliers.
In an open letter, Ofgem chief executive Jonathan Brearley said that the scheme was aimed at protecting those firms which could not access government support such as the Bank of England’s commercial paper programme.
Those firms eligible for the programme will be able to defer payments to the operators of the UK’s electricity and gas networks until March 2021.
Such costs usually make up 20 per cent of consumer bills.
Any deferred payments will accrue interest at the default industry rate, which currently stands at eight per cent.
One of the conditions of the support is that suppliers must certify that they will not pay executive bonuses or dividends until the money is repaid.
Brearley wrote that the aim of the scheme was to “ensure that energy consumers are offered the support and service they need and to minimise disruption for consumers and other market participants that could arise should companies exit the energy market in a disorderly way over the next few months”.
Numerous smaller energy companies have gone out of business in the last two years, with the coronavirus prompting fears that another flurry of bankruptcies could follow.
In March it was reported that industry body Energy UK was leading talks with the government about financial support for both consumers and suppliers.
Brearley thanked the Energy Networks Association for its support in developing the scheme.