Introducing a general ongoing fit and proper requirement

What this is about

Ofgem proposes to modify a number of licences to require licensees to ensure their senior personnel remain fit and proper on an ongoing basis, not just at the point of application. Today, suitability is assessed before a licence is granted. After that, the enduring obligation only bites on three categories of licensee: gas suppliers, electricity suppliers, and carbon dioxide transport and storage (CCS) licence holders. Everyone else, network operators, interconnectors, distribution and transmission licensees, smart metering, faces a one-time gate at entry and nothing thereafter. Ofgem wants to close that gap by writing a continuous standard into all licences, so that if the people running a licensed business change or deteriorate, the licensee carries an enforceable duty to keep them suitable.

The timing follows directly from the 2021/22 supplier failures. Twenty-nine suppliers exited the market, the Supplier of Last Resort and special administration machinery was invoked repeatedly, and the mutualised cost landed on every consumer's bill. Ofgem's post-mortem identified weak governance and undercapitalised balance sheets as the structural cause, and the regulatory response has been a steady tightening: minimum capital requirements, the Financial Responsibility Principle, milestone assessments, and the supplier-side ongoing fit and proper obligation introduced as part of that programme. This consultation extends the supplier-tested mechanism across the whole licensing estate. The logic is that governance failure is not unique to suppliers; a network or storage licensee whose senior management degrades poses risks Ofgem currently has limited standing to act on until something goes wrong.

Read against the analytical grain, this is a move from a binary entry test toward a continuous compliance obligation. The entry assessment is the seen control; the unseen risk is everything that happens to a licensee's governance over a 25-year network licence or the multi-decade life of a CCS asset. The proposal's substance is leverage: an ongoing duty gives Ofgem a standing hook to question, direct, and ultimately revoke where senior personnel become unsuitable, rather than waiting for financial distress to make the case for it. Whether that leverage disciplines behaviour or simply adds a compliance surface depends entirely on how the standard is defined and how cheaply it can be exercised, and the consultation document (the 357KB PDF, not reproduced in the source text here) is where that detail sits.

Options on the table

The published page describes a single proposal rather than a menu of alternatives, so there is no formal option set to lay out. The substantive choices are nonetheless embedded in the design, and a respondent's leverage is in how these are resolved. Three design dimensions matter.

Scope of licences covered

The proposal is framed as applying "across all licences." The real question is whether a uniform standard is appropriate for licensees with very different risk profiles. A small supplier with thin capital and a fast-moving founder team is a different governance proposition from a regulated monopoly network operating under RIIO with stable institutional ownership. A single standard applied uniformly is administratively simple for Ofgem but risks loading a supplier-failure-shaped obligation onto network and CCS licensees whose failure modes are not the same. The winners from a broad uniform scope are incumbents who already run mature compliance functions and can absorb the obligation as fixed overhead; the losers are smaller and newer entrants for whom it is a proportionally larger barrier. This is the standard regulatory-capture dynamic: a compliance requirement is a smaller burden the larger you are.

Definition of "senior personnel" and "fit and proper"

The obligation only has teeth if "senior personnel" is defined with enough precision to be enforceable and enough flexibility not to be gamed, and if "fit and proper" sets a standard that catches genuine governance failure without becoming a discretionary instrument. The supplier regime already has working definitions; the open question is whether they transplant cleanly to network and storage licensees with different board structures, ownership chains, and management hierarchies. A vague standard hands Ofgem broad discretion (more leverage, less predictability for licensees); a tightly specified one is predictable but easier to structure around.

Enforcement mechanism and consequences

An ongoing duty is only as strong as what follows a breach. The spectrum runs from a notification-and-remediation model (licensee must tell Ofgem and fix it) through directions powers to licence revocation. Revocation of a network or CCS licence is a far heavier instrument than revocation of a supply licence, because the asset and the obligations attached to it do not simply disappear, so the practical question is what graduated enforcement looks like before the nuclear option. The consultation PDF is where the proposed enforcement architecture is set out; respondents with a stake in the answer should work from that document, not the landing page.

Questions being asked

The consultation page reproduced here does not enumerate formal numbered questions; those sit in the 357KB consultation PDF. Based on the proposal as described and the audience Ofgem has invited, responses are likely to be structured around the following themes. Treat these as the issues to address rather than verbatim questions.

Scope and proportionality

- Should the ongoing fit and proper requirement apply uniformly across all licence types, or be calibrated to the risk profile of different licensee categories? *(This is the central proportionality question: one standard for all, or a tiered approach.)* - Are there licence types where an ongoing requirement is unnecessary because other regulatory controls already provide equivalent assurance? *(Asking respondents to identify overlap with RIIO governance conditions, ring-fencing, or ownership controls.)*

Definitions

- Is the proposed definition of "senior personnel" appropriate, and does it capture the right individuals across different corporate structures? *(Really asking whether the supplier-derived definition works for networks and CCS.)* - Is the "fit and proper" standard sufficiently clear to be applied consistently and complied with predictably? *(Probing whether the standard is enforceable without becoming arbitrary discretion.)*

Compliance burden

- What ongoing assessment, monitoring, and record-keeping would licensees need to put in place, and what is the expected cost? *(The transaction-cost question: what does continuous compliance actually cost to run.)* - Would the requirement create a disproportionate barrier for smaller licensees or new entrants? *(Directly inviting the regulatory-capture concern; trade bodies for smaller players should answer this.)*

Enforcement and consequences

- What enforcement response is appropriate where a licensee fails to maintain fit and proper senior personnel? *(Asking respondents to define the graduated ladder short of revocation.)* - How should Ofgem handle cases where unsuitability arises from a change Ofgem itself approved or did not object to at entry? *(The accountability-symmetry question, relevant where ownership changes pass through Ofgem.)*

Implementation and transition

- What transitional arrangements and notice period are needed before the requirement takes effect? *(Carrying-cost question: how long licensees get to build compliance processes.)* - How should the requirement interact with the existing supplier and CCS obligations to avoid duplicative or conflicting standards? *(Asking whether the existing regimes are absorbed, aligned, or left parallel.)*

How to respond

This consultation has closed. It was published on 22 September 2025 with a closed date of 1 November 2025, and the status is "Closed (awaiting decision)." The page asks for responses by 31 October 2025 (the page carries both a 31 October request date and a 1 November closed date; the operative deadline has in any case passed).

For reference, the stated submission route was:

- By email: licensing@ofgem.gov.uk - Accepted formats: response by email, with PDF, Word (.doc), or Excel (.xls) attachments accepted as part of a response - Confidentiality: responses should be clearly marked if considered confidential - Contact: Ashley Hassell, 0207 901 7000, licensing@ofgem.gov.uk

The full consultation document, "Introducing a general ongoing fit and proper requirement" [PDF, 356.91KB], holds the formal questions, the proposed licence drafting, and the enforcement design. Anyone tracking the outcome should now watch for Ofgem's decision and the statutory licence modification notices that follow, since the substance of the obligation, scope, definitions, and enforcement consequences, will be settled in that decision rather than in this consultation.