(Adds context, more detail)
By Nina Chestney
LONDON Feb 9 Britain's energy market regulator
Ofgem will review the way it awards supply licences and
financial requirements on energy suppliers later this year, it
said, following calls for firms to undergo stricter financial
In a speech on Thursday, Ofgem Chief Executive Dermot Nolan
said there had been a lot of interest in the energy sector's
financial stability due to the increasing number of suppliers,
many of which are very small.
"We have had many representations from those who consider we
should require companies to meet more significant financial
tests both before and after receiving a licence," he said.
"So we will review our approach to awarding supply licences,
the financial requirements on suppliers, and how we monitor
supplier performance later this year," he said, adding it was
possible the regulator would choose not to make any changes.
At the moment, Ofgem can monitor the financial situation of
energy suppliers and can revoke a supply licence and appoint
another supplier to take on a company's customers if it goes
bankrupt, for example.
Apart from the Big Six energy firms - EDF Energy,
Innogy's Npower, E.ON, Iberdrola's Scottish
Power, SSE and Centrica's British Gas-
there are more than 40 others.
Energy supplier GB Energy went bankrupt late last year,
after a quick rise in wholesale energy prices and its inability
to forward buy energy meant its business became untenable.
Some small suppliers might not have enough financial means
to buy energy further ahead than a few months, while larger
companies typically hedge a few years ahead, locking in prices
over a longer period.
The weak hedging position of some small suppliers has
worried other players in the market as they say the bankruptcy
of one could make customers lose faith in better-managed
(Reporting by Nina Chestney; editing by Susan Thomas and Adrian