Fgem’s failure to effectively regulate energy suppliers as early as 2018 has “inflicted significant costs” on households, the spending watchdog said.
Despite financial resilience issues for energy retailers that emerged in 2018, Ofgem did not tighten requirements for new suppliers until 2019 or for existing suppliers until 2021, when wholesale gas and electricity prices had soared to unprecedented levels, the Public Accounts Committee said. PAC). ) said.
Since July last year, some 29 energy suppliers have gone out of service, affecting about four million households.
Households will pay dearly, with bailout costs added to record and bills rising
Customers have been left to pick up the £2.7bn cost of the outages at an additional £94 per household, a cost that is “very likely to rise,” the PAC said in a report.
The commission concluded that this was due to “Ofgem’s failure to regulate the energy supplier market effectively”, adding that the regulator “did not strike the right balance between promoting competition in the energy supplier market and ensuring that energy suppliers were financially resilient”.
It found that the price cap “offered very limited protection to households against wholesale energy price increases”, and noted that Ofgem’s projected prices “could deteriorate significantly by 2023”.
The Department for Business, Energy and Industrial Strategy (BEIS) and Ofgem should “look at the costs and benefits of the price cap from a consumer perspective” before making decisions about the future of energy price controls.
PAC said the position of vulnerable customers, who are already paying higher energy prices, is “unacceptable”.
And it said it was not convinced Ofgem “still has the skills and capacity it needs to take a more proactive role in regulating the energy supplier market”.
PAC Chair Dame Meg Hillier said: “It is true that global factors have caused the unprecedented gas and electricity prices that have caused so many power outages in the past year, at such dire costs to households, but the fact remains that we have regulators to frame the create to support us in bad times.
“Problems in the energy supply market were apparent in 2018 – years before the unprecedented price spike that triggered the current crisis, and Ofgem was too slow to act.
“Households will pay dearly, with the cost of bailouts added to record and bills rising.
“The PAC wants to see a plan within six months for how the government and Ofgem will put customer interests at the heart of a reformed energy market, driving the transition to net zero.”
Rocio Concha, director of policy and advocacy at Which?, said a “long-term solution” to rising energy costs is clearly necessary.
“While additional support and the energy price cap guarantee provided short-term relief for many households, it is clear that we need a long-term solution to rising bills,” she said.
“The government and regulator urgently need to undertake a broad overhaul of energy prices – including the price cap – to build a fair and affordable system for consumers.
“The government should also develop a program to rapidly improve home insulation – as this will help lower people’s energy costs for years to come.”