ACM carries out additional assessment into financial resilience of energy suppliers

In the spring of 2022, the Netherlands Authority for Consumers and Markets (ACM) will conduct an additional assessment to check whether energy suppliers, even after the winter months, will continue to be able to comply with the requirements relating to security of supply. All energy suppliers that have licenses for supplying electricity and/or natural gas to consumers must submit additional information to ACM in March 2022. The additional check after the winter months comes on top of the monitoring activities that ACM already carries out each year among all energy suppliers prior to the winter months.

If ACM’s assessment reveals that energy suppliers are in poor financial shape, oversight over these suppliers will be intensified. Energy suppliers are also required to contact ACM if security of supply may be jeopardized. In addition, ACM always keeps a close watch on energy suppliers that suddenly get a large group of customers because they took over the customer base of another company that had gone bankrupt.

When assessing license applications, ACM assesses whether suppliers meet the criteria, and subsequently carries out regular checks. With these steps, however, ACM is unable to prevent all financial problems from happening. ACM does ensure, however, that customers will always be supplied energy.

Risks when prices go down

In its annual check of the financial positions of energy suppliers in 2021, ACM asked for additional information about the way suppliers buy energy. Energy suppliers can buy energy on a daily basis at current prices or may choose to hedge their energy purchases for a longer period of time. By hedging their energy purchases, suppliers reduce their risks if energy prices go up, but it may also carry risks if energy prices were to drop significantly. When prices go down, customers are more likely to switch suppliers because they will be able to get a lower rate with a different supplier. The supplier will then have to sell the excess energy at a lower price. When customers cancel fixed-term contracts (for example 1-year or 5-year contracts with fixed rates), suppliers are allowed to charge a cancellation fee.

Study and technical briefing

Over the past six months, ACM has revoked the supply licenses of eight energy suppliers. Six of those suppliers had gone bankrupt as a result of the high energy prices. Thanks to ACM’s actions, the supply of natural gas and electricity had never been interrupted during those months. The bankruptcies and the thereto-related revocations of the licenses did, however, have financial consequences for consumers. In order to evaluate the use of its regulatory tools, ACM will have an independent study carried out into the granting of licenses and into its oversight of suppliers, even in situations where energy suppliers run into financial trouble.

In a technical briefing on February 9, 2022, for the Dutch House of Representatives’ Standing Committee on Economic Affairs and Climate Policy, ACM gave an explanation of the current developments on the energy market as well as of recent bankruptcies of energy suppliers.

See also

09-02-2022 Technical briefing on the developments on the retail market for energy (in Dutch)