Britain’s energy regulator has admitted it should have toughened financial oversight of the country’s electricity and gas retail market much earlier, as it came under fire from MPs for its role in a price crisis that will push up household bills 54 per cent this year.
Jonathan Brearley, chief executive of Ofgem, told MPs on Tuesday that the regulator had been too focused on increasing competition in the retail energy market in an attempt to break-up the stranglehold of the so-called “big six” of British Gas, EDF, Eon, Npower, SSE and ScottishPower.
Brearley said the regulator should have been “more careful” about the financial resilience of smaller suppliers entering the market over the past decade.
“We accept that had we done that earlier [introduced measures to ensure the financial resilience of new entrants], it would have been better for customers,” Brearley told MPs on the business, energy and industrial strategy committee.
His comments came as 22mn households across Britain face a big jump in their energy bills from April after Ofgem last week announced a 54 per cent increase in Britain’s price cap, prompting Rishi Sunak, the chancellor, to announce a £9bn support package for households. The package includes a £150 rebate for all English properties in council tax bands A to D and a £200 rebate for all households from October.
Ofgem’s oversight of the market was criticised after 29 energy suppliers went bust last year as wholesale gas and power prices soared.
Consumer groups and suppliers said many of the problems that led to the collapses had been evident for years. Ofgem has been accused of being too slow to respond to warnings that many newer entrants had weak balance sheets, poor or no hedging strategies or were using customer deposits to fund ordinary business activities.
Brearley said Ofgem planned to set out new measures next month to ringfence customer deposits. In the past two months, it has also proposed a number of other reforms, including new financial stress tests for suppliers.
Nusrat Ghani, Conservative MP for Wealden, said many of Ofgem’s measures were “too little, too late”.
Darren Jones, Labour MP for Bristol North West and chair of the committee, said: “Surely these things should have been done without there being an energy crisis in the first place?”