Ofgem boss declines bonus and apologises

The head of energy watchdog Ofgem has told MPs he is not taking a bonus this year, as he apologised for moving too slowly to protect vulnerable gas and electricity consumers.

Dermot Nolan was accused at a parliamentary committee hearing of a “passive” approach to his job of regulating the market, which had led to many customers paying higher bills.

The Ofgem chief executive said he “regrets” not taking swifter action to cap the amounts vulnerable people have to pay on power companies’ standard variable tariffs (SVTs).

He told the House of Commons business, energy and industrial strategy committee that Government legislation to introduce caps on SVTs must complete its passage through Parliament by the start of the summer if it is to take effect in time for Christmas.

He said the Government’s cap should “go a long way towards fixing the market” by significantly reducing bills for people on SVTs, but he warned it may also lead to a reduction in “switching”, as there will be less incentive for consumers to shop around.

If the cap lapses as planned in 2023, Mr Nolan said there will still be a need for a new limit on maximum bills for vulnerable households, who are unlikely to engage with the switching process, even if technological changes make it possible to change supplier with as little as three or four taps on a smartphone.

Plans for a universal price cap were announced in the Conservative manifesto last year, but after the election Theresa May passed responsibility to Ofgem, which faced criticism for coming up only with proposals to protect the most vulnerable.

Frustrated by the lack of progress from the regulator, the Prime Minister announced legislation to rein in “rip-off” bills in her speech to the Tory conference in October.

Around 12 million households are believed to be on uncapped SVTs, despite a report from the Competition and Markets Authority that warned in 2016 they were contributing to £1.4 billion in excess profits to energy companies.

Mr Nolan warned that energy companies may seek to “game the system” by taking advantage of an exemption allowing “green” deals to be priced higher than the cap.