Ofgem accused of negligence after energy failures cost billions
‘Ofgem’s negligence has contributed to higher bills, in complete contradiction to its mandate’
THE head of the energy regulator faces allegations of negligence and incompetence from an influential group of MPS after overseeing “the most expensive market failure since the banking crisis in 2008”.
Ofgem, led by Jonathan Brearley, came under a barrage of criticism last night from the Commons business committee, which claimed “a fundamental problem in the performance, the governance and the leadership of the energy regulator” had cost households billions of pounds. MPS blamed the watchdog for the collapse of 30 suppliers since May 2021 amid spiking energy prices, adding £2.7bn, or £94 per bill payer, to the costs of the remaining companies who take on the customers of the failed businesses.
Calling delays to the introduction of new, tougher rules “unacceptable and inexcusable”, they said: “Ofgem’s incompetence over many years enabled inadequately resourced and inexperienced founders to start energy companies. Ofgem’s negligence has contributed to higher bills, which is in complete contradiction to its mandate to act in the interests of consumers.”
Mr Brearley, who took on his current role in 2020, will be hauled in front of MPS every year along with Ofgem’s chairman Martin Cave to explain how they are turning the regulator around.
The committee said that if Mr Brearley’s predecessor, Dermot Nolan, was still in post, it would be calling for his dismissal.
MPS added: “Whilst we have been reassured by Jonathan Brearley that changes are being made to the governance, leadership and performance of Ofgem we remain deeply concerned that such negligent behaviour was able to take place for so long. We therefore require the current and any future CEO and chair of Ofgem to report annually to this committee and to [the Business Department] on the measures in place to ensure effective accountability and transparency required from Ofgem.”
Darren Jones, the committee’s chairman, said this means “we expect the basics to be done properly, which they haven’t been in the past.” He said: “This means fit and proper person tests for management, financial account supervision, proactive enforcement of consumer issues, stronger guidance on hedging and more effective oversight and engagement of the board.”
MPS also called for funding for a programme to insulate houses across Britain to bring down energy bills. The committee fears that the bill support package announced in May, amounting to £400 per household, is already being “eclipsed” by soaring prices.
They called for more funds and better targeting of the scheme to those on low incomes, as well as an immediate programme to insulate homes to permanently reduce bills.
An Ofgem spokesman said the regulator has been “clear and transparent about the fact that suppliers and Ofgem’s previous financial resilience regime were not robust enough” in the face of a “once-in-a-generation global energy price shock”.
The Business Department said: “No national government can control global inflationary pressures; however, we have introduced an extraordinary package of support, including £1,200 each for the most vulnerable households.”