Energy suppliers have been cautioned against distributing dividends as the British energy supply sector anticipates a resurgence in profitability.
Jonathan Brearley, Chief Executive Officer of Ofgem, has issued a warning to all domestic energy suppliers, urging them to learn from the energy crisis as the retail sector is expected to return to profitability after five consecutive years of losses.
In a letter addressed to the CEOs of energy suppliers, Brearley has emphasised that Ofgem stands prepared to take action against suppliers that lack sufficient capital if they prioritise dividend payouts over recapitalisation.
For a significant period, energy suppliers have faced challenging trading conditions resulting in sustained losses.
However, with the drop in the price cap and a decrease in wholesale energy prices, the sector is anticipated to regain profitability this year, enabling suppliers to recover some of the losses incurred in recent years.
Jonathan Brearley said: “The energy market has changed. Ofgem has introduced major changes to the market, and we need suppliers to learn the lessons of the energy crisis and play their part by making sure they’re financially robust, can absorb potential losses and are meeting our new capital requirements.
“I expect no return to paying out dividends before a supplier has met those essential capital requirements. We will closely monitor the situation, including to make sure that the market is operating competitively on price alongside customer service and innovative products, and to make sure that suppliers are meeting their obligations to the most vulnerable.”
