Ofgem has strongly criticised Utilita’s appeal to the Competition and Markets Authority (CMA) regarding the introduction of minimum capital requirements for energy suppliers.
Utilita expressed concerns that the set capital target of £115 adjusted net assets per domestic dual fuel equivalent customer may not serve its intended purpose.
Consequently, Utilita sought an appeal with the CMA during the summer.
However, Ofgem has responded to these claims, describing Utilita’s challenge as “ill-founded.”
According to the regulator, the capital target is a reasonable and necessary measure to enhance the resilience of energy suppliers.
It argues that requiring companies to maintain a minimum level of capital will contribute to market stability in several ways.
This includes enabling early intervention by Ofgem and the supplier to support recapitalisation for companies falling below the capital target, reducing moral hazards through requiring companies to have a financial stake and ultimately lessening the mutualised costs that consumers would bear in the event of supplier failure.
Energy Live News has approached Utilita for comment.
