Ofgem blames mistakes that led to the collapse of energy companies | energy industry

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The Energy Regulatory Agency is responsible for a series of mistakes and missed opportunities that allowed dozens of energy suppliers to collapse and led to skyrocketing home bills, according to a report from a leading consumer rights charity.

Citizens Advice has blamed the industry regulator, Ofgem, for failing to take action against rule-breaking suppliers for nearly 10 years despite growing concerns about the energy market.

In a damning report, the consumer watchdog warned of evidence of financial weakness in the energy market “well before this year’s crisis”, but said Ofgem had not heeded the warnings, meaning households would bear the brunt of the “list of errors”. .

The market lost 26 suppliers amid soaring record gas prices, which could mean household bills rise by an additional £94 to cover the cost to businesses of acquiring more customers.

Claire Moriarty, chief executive of Citizens Advice, said households would face a multibillion-pound bill “in large part because Ofgem missed multiple opportunities to regulate the market and address supplier breaches of rules”.

The report found Ofgem failed to act after repeated warnings from Citizens Advice about the precarious financial situation of a group of small suppliers that entered the energy market between 2010 and 2019.

It has also been slow to take action in recent years even as the industry’s customer service levels decline and financial instability increases, according to the report.

“Recent wholesale price increases have been difficult to deal with under any circumstances, but they do not necessarily lead to the collapse of a third of the companies in the market,” Moriarty said.

The regulator made plans to tighten financial controls on small suppliers at the start of 2020, but took action against only one despite evidence that many in the market depended on their customers’ credit to stay afloat.

It also opened only one formal customer service investigation in the past three years, after the number of people working on enforcement at Ofgem fell by a quarter.

Citizens Advice has called for an independent review of the causes of the market crash, including Ofgem’s regulation and reforms, and measures taken by the government and Ofgem to protect consumers from unnecessary sharp increases in bills to pay for suppliers’ collapse.

“If consumers lack confidence in the energy market, or feel they are getting a bad deal, the transition to net zero will be even more difficult. So reform is vital for the future as well as to avoid mistakes of the past.

A spokesperson for Ofgem said the regulator accepted that “the current system was not designed for this type of extreme market event” and that the energy market needed to be “fixed and fast”.

The spokesperson added that the regulator plans to put in place changes in the next few weeks that “demonstrate the seriousness” with which it is taking “the pace of change required.” The spokesperson also welcomed the opportunity to work alongside all consumer groups, including Citizen Advice, “to protect energy consumers now and in the future.”

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