Ofgem ‘should have acted differently’ to ensure companies did not collapse
Energy prices are set to spike by hundreds of pounds for millions of households around the world.
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Your support makes all the difference.The energy regulator Ofgem failed to ensure that companies were not likely to go bust before a massive series of collapses that will cost households around £200 million, its boss has warned.
Jonathan Brearley also said that fewer customers will hunt for better deals in the future and said that as things stand bills could rise again in October.
His comments came just days after the regulator said that it would allow energy bills to increase by 54% on average for around 22 million households around Britain.
It could amount to a rise of nearly £700 per year for the average household.
More than two dozen energy suppliers have gone bust since the beginning of September, leaving around four million customers without a supplier.
The cost of protecting these customers will be spread across energy bills, something that the boss of British Gas owner Centrica thinks might cost around £400 million.
Mr Brearley disagreed, saying that the cost is more likely to put around £200 million on bills.
He also said that energy bills could go up again in October, but warned against predictions this far in advance.
“When you look at the forward prices right now, there is upward pressure in prices still, so you may see a rise in October,” he told MPs on the Business Energy and Industrial Strategy Committee.
“But the caution I have in predicting that is that I went back and looked at what we predicted in August, and the difference between those predictions – which were that the price cap would stay roughly level – versus what we’ve seen, are huge.”
A decade ago the Government and Ofgem tried to push down energy bills by encouraging competition and letting new small companies come in and compete with the old players.
There was a time with a large number of people coming into the market, because Ofgem’s focus really was on allowing diversification. With hindsight we would have done something differently
It was in many ways successful, and helped break up the stranglehold that the old Big Six had on the market.
But now many of the new players have gone out of business in recent months, squeezed by high energy prices, but some were also poorly run.
“There was a clear ambition to diversify supply. I think, frankly, that was not just an Ofgem ambition, that was an ambition that was shared with the Government at the time,” Mr Brearley said.
“There was a time with a large number of people coming into the market, because Ofgem’s focus really was on allowing diversification.
“With hindsight we would have done something differently.”
Mr Brearley said that the balance that customers pay to their supplier should have been ring fenced.