MPs have questioned whether or not the power regulator, Ofgem, is match to police the business after it was blamed for costing British households billions of kilos because of suppliers going bust.
Politicians on the highly effective public accounts committee stated Ofgem had failed to control the sector “at a substantial price to billpayers” in a damning report into the regulation of power suppliers.
The regulator was blamed for failing to stop the collapse of 29 power suppliers since July 2021, affecting about 4 million households. The failures price shoppers an estimated £2.7bn, or an additional £94 every, via a cost on their payments to get better the price of managing prospects’ transfers to a brand new provider.
That determine doesn’t embrace the billions the federal government has spent in bailing out Bulb Power, which was by far the biggest provider to break down, with 1.5 million prospects. Bulb was snapped up by rival Octopus Power late final month after practically a 12 months in a government-handled administration.
A wave of suppliers has collapsed through the power disaster due to a surge in wholesale gasoline costs final 12 months, which was then exacerbated by Russia’s invasion of Ukraine in February. The MPs’ report accused Ofgem of being “too gradual to behave” to make sure suppliers had been financially resilient, even earlier than the disaster.
The regulator had tried to extend competitors by opening up the power market to new suppliers. Nonetheless, the introduction of a cap on power payments underneath Theresa Could’s authorities, mixed with a surge in wholesale gasoline costs, uncovered the weak spot of many firms’ steadiness sheets.
Dame Meg Hillier MP, chair of the committee, stated: “It’s true that international elements brought on the unprecedented gasoline and electrical energy costs which have brought on so many power provider failures during the last 12 months, at such horrible price to households. However the truth stays that now we have regulators to set the framework to shore us up for the dangerous instances.”
She added: “Issues within the power provide market had been obvious in 2018, years earlier than the unprecedented spike in costs that sparked the present disaster, and Ofgem was too gradual to behave. Households pays expensive, with the price of bailouts added to report and rising payments. The committee desires to see a plan, inside six months, for the way authorities and Ofgem will put prospects’ pursuits on the coronary heart of a reformed power market, driving the transition to internet zero.”
The committee stated it’s “not satisfied that Ofgem but has the abilities and capability it must take a extra proactive function in regulating the power provider market”. The report confirmed Ofgem, led by chief government Jonathan Brearley, has elevated the scale of its workforce from 816 employees in 2018 to 1,400 now and has requested the Treasury for extra sources.
The committee made a collection of suggestions together with a evaluation of the “provider of final resort” course of, which ensures continuity of provide when a provider fails.
It additionally desires Ofgem to point out the way it has elevated its capability to evaluate suppliers’ monetary threat and known as for a evaluation of its value cap.
The cap has been sidelined by the power value assure, a coverage launched by Liz Truss to restrict the typical family invoice at £2,500 for six months. Nonetheless, Ofgem’s value cap will come again into drive for these not receiving additional assist from April.
Ofgem stated: “The sheer scale and tempo of this once-in-a-generation international power value shock meant provider failures had been seen all around the world. Nonetheless, the provider of final resort scheme acted as an important security internet for British shoppers, making certain they continued to obtain power when their provider failed and saved their credit score balances. This security internet inevitably incurred prices.
“Looking forward to this winter, costs stay risky, nevertheless the market is now in a way more resilient place, partly on account of sturdy steps we’ve taken to cut back the danger of future provider failures and to lift the bar on entry for brand spanking new suppliers. And our proactive compliance evaluations have dug deep into the practices of all power suppliers, enabling us to demand enhancements the place they’ve been discovered missing.”