Ofgem consults on Universal Service Obligation exemption
Ofgem wants smaller electricity suppliers with fewer than 50,000 domestic customers exempted from the Universal Service Obligation. The consultation on the licence wording closes on 5 November 2026.
Key points
- Ofgem proposes exempting electricity suppliers with fewer than 50,000 domestic customers from the Universal Service Obligation.
- The consultation on the licence wording closes on 5 November 2026.
- Ofgem has changed the wording so customers supplied by firms in the same corporate group count towards the threshold.
- The change is a proposal and is not yet in force.
Ofgem is consulting on the exact licence wording for an exemption from the Universal Service Obligation (USO) for smaller electricity suppliers. Under the proposal, suppliers with fewer than 50,000 domestic customers would not have to offer supply to all domestic consumers until they reach that threshold. The regulator has not yet made a final decision, and responses are due by 5 November 2026.
What the Ofgem Universal Service Obligation exemption would change
The USO is the obligation on suppliers to offer supply to domestic consumers. Ofgem’s proposal would lift that requirement for electricity suppliers while they remain below 50,000 domestic customers. Once a supplier reaches the threshold, Ofgem said, the USO would apply to it.
This is the second stage of the process. Ofgem said it previously consulted on the principle and, having considered the responses, still believes the exemption is "a proportionate, targeted measure". It is now asking only about the specific wording to be added to the electricity supply licence.
The consultation is open until Thursday 5 November 2026. Ofgem’s page does not give a date for a final decision or for when any change would take effect, so households should treat the exemption as a proposal for now.
Who is affected by these energy supplier regulation changes
The proposal covers electricity suppliers, not gas, and it concerns domestic customers. Ofgem’s wording refers to suppliers with fewer than 50,000 domestic customers, so larger suppliers would see no change. Households with a larger supplier would not be affected directly.
One change follows feedback to the earlier consultation. Ofgem said it has adjusted the draft so that the 50,000 threshold "takes account of customers supplied by licensees within the same corporate group". In practice, a business cannot stay under the line by splitting its customers across several licensed companies. The figures below are illustrative, not real suppliers.
| Illustrative case | Domestic customers | Likely position under the proposal |
|---|---|---|
| Single supplier | 30,000 | Below the threshold, so exempt |
| Two licensees in one group, 30,000 each | 60,000 combined | Group customers count together, so above the threshold |
| Single supplier | 50,000 or more | Threshold reached, so the USO applies |
That reading follows Ofgem’s description of the group wording. The final licence text may differ, which is why the regulator is consulting.
Cutting red tape for smaller suppliers: what Ofgem says
Ofgem said the change is "intended to reduce barriers to entry and support innovation in the electricity retail market". The argument is that a new or small company may find it harder to enter the market if it must be ready to supply every domestic consumer from the start. Ofgem has not published figures on what the USO costs smaller suppliers on the page seen by Reported.News, so the size of any saving is not stated.
The regulator also said the measure could work while "limiting risks to consumers". It has not set out in the consultation summary what those risks are or what safeguards would sit alongside the exemption. A household that cannot get an offer from a small supplier could still look to larger suppliers, but that is our reading, not an Ofgem statement.
The summary does not name critics. It says only that Ofgem considered responses to its earlier consultation and changed the group wording after feedback. Ofgem has invited energy suppliers, other industry parties, consumer groups and charities to respond this time.
What to do now
For most households, no action is needed today because nothing has changed. A sensible first step is to check whether your electricity supplier is a smaller company. Your bill or your supplier’s website should say who holds the licence, and any statement about customer numbers will usually be in company reports.
If you are with a smaller supplier, keep a note of your contract terms and the supplier’s complaints process. When Ofgem publishes its decision, check whether the final licence text changes anything you rely on. Ofgem’s consultation page is the place to look for updates.
If you represent a consumer group or charity, or want to put a view on record, responses go by email to marketsstrategy&[email protected] before the 5 November 2026 deadline. Keep any response to the specific licence wording, since that is what Ofgem is asking about.
Your questions answered
What is the Universal Service Obligation for energy suppliers?
Ofgem’s consultation describes it as the requirement for suppliers to offer supply to all domestic consumers. The proposed change would pause that requirement for electricity suppliers with fewer than 50,000 domestic customers. The consultation does not set out the full detail of how the obligation currently works.
How does Ofgem regulation affect small energy companies?
Ofgem sets the licence conditions that suppliers must follow. This proposal would change the electricity supply licence so that smaller firms face one fewer obligation while they grow. Ofgem says the aim is to reduce barriers to entry and support innovation.
What exemptions exist for smaller energy suppliers in the UK?
The source describes this proposed exemption only, and it is not yet in force. It would apply to electricity suppliers with fewer than 50,000 domestic customers, counting customers across the same corporate group. The consultation page does not list other exemptions.
How this article was produced
This story was researched, written and fact-checked by the Reported.News AI newsroom and edited by Alexander Ingram, our AI Money desk editor. Every claim is checked against the sources listed below. Our Editors, Jack Shaw, James Smith, Matthew Price and Suzy Eaton, oversee everything we publish. Read how we report.
Verification status
Sources (1)
- Exempting smaller suppliers from the Universal Service Obligation (Ofgem, 8 Oct 2026)
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Desk View · Opinion · Alexander Ingram (AiMoney)
The aim of helping new suppliers enter the market is reasonable, and counting customers across a corporate group closes an obvious loophole. But the published summary says little about what protections households would have if a small supplier declines to serve them. Until Ofgem spells that out, consumers and charities should use the consultation to ask, and Ofgem should answer plainly before any change takes effect.
Opinion from our AI money desk, based on the verified facts above. This isn't financial advice.
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