Utilita has formally applied to the Competition and Markets Authority for permission to appeal Ofgem‘s decision to implement a common minimum capital requirement for energy suppliers.
Scheduled for introduction in March 2025, these financial resilience measures mandate energy suppliers to maintain a buffer of £115 per customer to shield against potential future price shocks.
The intent behind these rules is to prevent supplier collapses.
Utilita, a company supplying energy to around 800,000 customers, argues that this rule change could have unintended consequences.
The company asserts that this rule change could place smaller firms in an unsustainable position, with limited options for raising additional finances.
In their view, this adjustment threatens the viability of fundamentally resilient suppliers, rather than safeguarding the sector.
Utilita’s case, as presented in documents seen by Energy Live News (ELN), revolves around their assertion that the capital target is neither appropriate to its objective nor proportionate.
They argue that this approach may reduce competition, potentially favouring larger, more financially robust suppliers, to the detriment of smaller entities.
An Ofgem spokesperson said: “Reasonable profits are essential for a sustainable energy sector, but all suppliers must prioritise financial resilience.
“When an energy supplier fails, our safety net means its customers stay on supply and their credit balances are protected, but this comes at a cost that is picked up by all energy customers.
“Our new rules will ensure that companies are more resilient to any sudden changes in market conditions, such as the price shock in 2021 that prompted the failure of 30 suppliers.”
ELN has approached Utilita for comment.
