The energy regulator Ofgem has threatened penalties against energy firms if they put shareholders above their customer base.

Chief Executive Jonathan Brearley stated that financial practices seen before the energy crisis would not be tolerated.

This was as the cost of gas and electricity returned to the energy price cap shield from the beginning of the month following the end of the government's energy price guarantee.

The £2,100 cap for a typical household demonstrated a reduction in the cost of wholesale energy since the peaks of 2022 and early 2023, Sky News reports.

At the time of Russia's invasion of Ukraine around 20 suppliers collapsed so new rules were brought in by Ofgem last November to bolster the resilience of business models.

The Bolton News: Ofgem are encouraging more resilience in energy firms after 20 collapsed around the time of Russia's invasion of UkraineOfgem are encouraging more resilience in energy firms after 20 collapsed around the time of Russia's invasion of Ukraine (Image: PA)

Mr Brearley used an open letter to energy firms to remind them of their obligations including a requirement to hold on to more cash or assets to reduce the risk of them going bust.

'Suppliers to learn the lessons of the energy crisis'

Ofgem expects the household supply sector to return to profit this year after five years of losses.

Mr Brearley wrote in his letter: "An energy sector where companies can make a reasonable profit is important to create a sustainable and competitive market for consumers."

However, he clarified that returning to how things were run before the energy crisis wasn't an option as energy suppliers have a need to behave "responsibly".

He added: "The energy market has changed. Ofgem has introduced major changes to the market, and we need suppliers to learn the lessons of the energy crisis and play their part by making sure they're financially robust, can absorb potential losses and are meeting our new capital requirements.

"I expect no return to paying out dividends before a supplier has met those essential capital requirements."

Energy industry consultancy Cornwall Insight said last week it believed that, based on current market pricing and Ofgem's criteria, the price cap will fall to £1,978.33 from October from July's £2,074.