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Energy supplier Ovo admits non-compliance with Ofgem capital regime
Ovo has become the latest major energy supplier to disclose its failure to meet new capital adequacy rules imposed by the industry watchdog.
Sky News has learnt that Ovo Energy is the second of the UK's biggest gas and electricity companies to be in technical default of an Ofgem-imposed regime which came into effect in March. Octopus Energy, which has overtaken British Gas to become Britain's largest household energy supplier, publicly revealed its own non-compliance with the rules earlier this year.
Money latest: Major child benefit change for parents earning £60k On Friday, Greg Jackson, Octopus Energy's founder and chief executive, described the framework as "crude" in an interview with the Financial Times. According to measures introduced by Ofgem, energy suppliers must hold a certain level of cash or other tangible assets on their balance sheets, with the threshold set according to the number of customers they have.
A recent change to the rules, which removed intangible assets from the calculation, meant that a number of companies, including Octopus Energy and Ovo, were not technically compliant. The capital adequacy threshold is understood to work out at roughly £115 per dual-fuel customer.
A spokesperson for Ovo said: "We have taken proactive measures to align with Ofgem's new capital rules, working constructively to meet the requirements." Ovo was catapulted into the industry big league when it bought SSE's residential supply arm. It now has four million customers.
The company, like Octopus Energy, has a supply arrangement with Shell, which it argues significantly strengthens its financial resilience..
Amir Nisi
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