This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
This is the report summary, read the full report.
The Office of Gas and Electricity Market’s (Ofgem’s) failure to effectively regulate the energy supplier sector has come at a considerable cost to billpayers. Since July 2021, 29 energy suppliers have failed, affecting around 4 million households. Customers have been left to pay the £2.7 billion cost of supplier failures, which equates to £94 per household, at a time when energy prices are already at a record high. Costs are very likely to increase, including when Bulb Energy, which was the largest of the failed companies and is being funded by the government, is sold or exits special administration by other means. While the Department for Business, Energy & Industrial Strategy and Ofgem had procedures in place to ensure that customers did not experience any discontinuation of their supply as a result of the failures, many customers, including more vulnerable ones, experienced other forms of disruption. The ongoing volatility in the market means that this report, based on evidence collected up to July 2022, has in some cases been superseded by events, in particular the announcement of the Energy Price Guarantee for UK households in September 2022. The energy supplier market remains unstable as a result of the ongoing volatility in the wholesale energy market and our conclusions regarding Ofgem’s resourcing and regulatory approach very much still apply. It remains the case that Ofgem must urgently learn lessons to protect customers and prevent them from having to foot the bill in the event of any future failures.
It will be essential that the Department and Ofgem put the interests of customers at the heart of their approach to developing the energy supplier sector. In the short-term Ofgem is bringing in new rules to improve the financial resilience of the market but needs to manage complex trade-offs between improving the sector’s resilience and encouraging innovation and competition. In the longer-term the Department and Ofgem need to ensure that the energy market is structured and regulated in a way that will support the transition to net zero.