The regulator wants to measure supplier’s resilience against a range of scenarios and will agree an improvement plan for companies to address any concerns should they come up, particularly where consumers are at risk.
According to analysts at Investec last month, consumers in England, Scotland and Wales could be forced to pay £3.2bn to cover the costs left behind by 26 gas and electricity providers that went bust in the wake of the high prices.
Ofgem believes its new reforms will help to bolster risk management in the sector, protecting the interests of consumers and strengthening the resilience of the energy market.
As well as the financial stress testing for suppliers from January, supplier executive boards will also be required to undertake self-assessments of their management control frameworks and strengthening existing controls on “fit and proper” requirements.
They will also be consulting on requiring suppliers to pause expansion until Ofgem is...