# UK energy regulator drops plan to ring fence customers’ cash
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Ofgem drops plan to ring fence customer credit balances
Meta Description: Ofgem has decided not to require suppliers to ring fence customer credit balances, allowing them to invest capital. Find out more here.
URL: https://financedigest.com/uk-energy-regulator-drops-plan-to-ring-fence-customers-cashhtml

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LONDON (Reuters) -British energy regulator Ofgem on Friday dropped a planned requirement for suppliers to ring fence customer credit balances, allowing them to continue investing the capital as it seeks to find ways to protect the industry from market shocks.

The watchdog is still proposing a requirement for suppliers to hold capital reserves and will seek feedback on the plans it hopes to publish in spring 2023, it said.

But it said on Friday it was not proceeding with its plan to make suppliers ring fence customers’ credit balances, and would instead monitor the use of such funds.

The money suppliers needed to buy [renewable energy](https://www.financedigest.com/ges-investors-seek-solutions-to-renewable-energy-supply-chain-challenges.html "GE’s investors seek solutions to renewable energy, supply chain challenges") would be ring fenced under the proposals, Ofgem said.

Ofgem’s chief executive, Jonathan Brearley, said the [energy crisis](https://www.financedigest.com/europes-spend-on-energy-crisis-nears-800-billion-euros.html "Europe’s spend on energy crisis nears 800 billion euros"), caused by soaring wholesale gas prices this year, had profoundly impacted the sector and its business models.

These proposals will [provide protections](https://www.financedigest.com/banks-can-provide-a-protective-shield-to-defend-customers-from-cyber-attack.html "Banks can provide a protective shield to defend customers from cyber attack"), checks and balances for consumers, suppliers and the entire sector to create a more stable market,” he said.

Ofgem wanted well capitalised businesses that can weather price fluctuations, he said, but it did not want to block new suppliers or [“force suppliers to sit on lots of capital they could be investing](https://www.financedigest.com/analysis-uk-crisis-forces-off-kilter-businesses-to-halt-investment.html "Analysis-UK crisis forces ‘off kilter’ businesses to halt investment") in innovative ideas.

Centrica, the owner of Britain’s largest energy supplier British Gas, said dropping the proposal for customers’ credit [balances felt like an “abdication of responsibility by a regulator](https://www.financedigest.com/regulators-need-to-strike-the-balance-between-protection-and-strangulation.html "REGULATORS NEED TO STRIKE THE BALANCE BETWEEN PROTECTION AND STRANGULATION") not focusing on the right things.

When customers pay up front for their energy, they are trusting their supplier to look after their hard-earned money,” [chief executive Chris](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer") O’Shea said.

They would be appalled to learn their money was being used to fund day to day [business activities](https://www.financedigest.com/euro-zone-business-activity-contracted-again-in-aug-outlook-bleak-2.html "Euro zone business activity contracted again in Aug, outlook bleak"), but that’s exactly what’s happening in some companies, and it undermines confidence in the market.

He added that “if and when a large supplier fails, the recklessness of the decision not to [address this issue](https://www.financedigest.com/havensrock-thrive-app-launched-by-punter-southall-health-and-protection-to-address-workplace-mental-health-issues.html "Havensrock Thrive App launched by Punter Southall Health and Protection to address workplace mental health issues") will be clear for all to see.

[(Reporting by Pushkala Aripaka in Bengaluru and Paul Sandle in London; Editing by Savio D’Souza and Elaine Hardcastle)](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps")


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