Ofgem clamps down on shell companies

Neil Williams

15 Nov 2019

Typically the first key decision for a new entrant is to decide whether or not to purchase a shell company. Managed service providers typically apply to Ofgem for a licence on behalf of a shell company, taking the entity through the initial market entry testing requirements under the industry codes, and then sell this company on to expedite entry for a new supplier. Ofgem guidance regarding shell companies is not explicit. Some useful points are embodied in the following publications:

  • Transferring a licence to another company
  • Revoking a licence

Some recent and relevant publications from Ofgem are:

  • Tougher Tests Press Release
  • Final Proposals Entry Requirements
  • Applying for a gas or electricity licence
  • Ofgem stress tests for existing suppliers

Under Ofgem’s new application process, they expect to engage directly with the company that will be operating the licence. They have been engaging with “off-the-shelf” licensed company providers about their approach to any unsold licensed companies. On 15 November 2019 they issued revocation notices for licensed companies owned by “off-the-shelf” providers. From the revocations section of the Ofgem website, it is clear that more than 25 gas and electricity licences were withdrawn.

Retracting a previous licence for non-use should not prevent a new licence being granted to that entity. In these cases Ofgem’s application assessment would focus on that entity’s current readiness and preparation to enter the supply market, as explained in their guidance.

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