Ofgem CEO: We should have been tougher with energy suppliers before crisis – business live | Business

BEIS committee chairman Darren Jones MP begins today’s hearing by comparing the crisis in the energy market to the financial crisis, and asking if Ofgem has failed to effectively regulate and manage the sector.

Jones points out that 29 suppliers have gone bust since the start of last year, meaning £2.5bn could be loaded onto customer’s bills to pay for those failures.

Ofgem CEO Jonathan Brearley says there have been unprecedented changes in the wholesale energy market, with gas prices this winter five times higher than a year ago.

That has led to a huge rise in bills, and Brearley says he knows that £700 increase in energy bills announced last week will be very worrying for customers, when they’re also facing “other, much bigger financial pressures”.

And on top of that, around four million people have been affected by the collapse of those 29 suppliers, Brearley adds.

As a regulator, I hope we never have to go through either of those two things again.

Brearley adds that Ofgem did protect protected customers, by ensuring their energy supplies and credit balances were maintained as they moved to new suppliers.

But our regulation needs to change, he adds.

Brearley says the price cap did protect customers through the winter. But it must become more adaptable and flexible to keep up with volatile energy prices (Ofgem is proposing changing it every three months, not twice a year as at present).

And “financial regulation needs to be tougher”, Brearley says, admitting that Ofgem should have done this before the crisis.

We need a retail sector that is more resilient, and more able to deal with the kind of shock that we’ve seen.

We accept that had we done that earlier, this would have been better for customers.

[Many suppliers failed to hedge themselves against surging wholesale prices, and were unable to cope as the price cap prevented them lifting prices for consumers].