Ofgem ‘failures’ years ago are now hitting customers
Ofgem’s failures to effectively regulate energy suppliers as far back as 2018 have “come at a considerable cost” to households, the spending watchdog has said.
Despite problems with the financial resilience of energy retailers emerging in 2018, Ofgem did not tighten requirements for new suppliers until 2019 or for existing suppliers until 2021, by which point wholesale gas and electricity prices had increased to unprecedented levels, the Public Accounts Committee (PAC) said.
Some 29 energy suppliers have failed since July last year, affecting around four million households.
Customers have been left to pick up the £2.7 billion cost of the failures at an extra £94 per household, a cost that will “very likely increase”, the PAC said in a report.
The committee concluded this was due to “Ofgem’s failure to effectively regulate the energy supplier market”, adding that the regulator “did not strike the right balance between promoting competition in the energy suppliers market and ensuring energy suppliers were financially resilient”.
It found the price cap was “providing only very limited protection to households from increases in the wholesale price of energy”, noting that Ofgem expected prices could “get significantly worse through 2023”.
The Department for Business, Energy and Industrial Strategy (BEIS) and Ofgem should “review the costs and benefits of the price cap from a consumer’s perspective” ahead of making decisions about the future of energy price controls.
PAC said the position of vulnerable customers, who already pay higher energy prices, was “unacceptable”.
PAC chairwoman Dame Meg Hillier said: “Problems in the energy supply market were apparent in 2018 – years before the unprecedented spike in prices that sparked the current crisis, and Ofgem was too slow to act.
“Households will pay dear, with the cost of bailouts added to record and rising bills.”