Ofgem chief admits energy supplier market rules not ‘ready’ for wholesale price shock

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UK energy suppliers will be subject to “robust stress testing” in the future based on a proposal released Wednesday by industry regulators. Fierce criticism 26 companies failed to monitor the market in just four months.

Write in the Financial TimesJonathan Brearley, CEO of Ofgem, admits that the UK retail energy market is “not resilient” enough to withstand the rise in wholesale gas and electricity prices since the summer, with nearly 4 million customers. It led to the collapse of the supplier.

Due to the crisis, consumer groups, politicians and industry executives 49 domestic suppliers At the end of June.

Regulations were “not ready to survive a global shock of this magnitude,” Blairy said.

Ofgem’s planned reforms include more stringent stress testing of suppliers, preventing them from passing “inappropriate risks” to consumers and “playing an important role” in energy companies. He said it would include “more checks” on people.

“We will incorporate the rules and regulations needed to create a stronger, more innovative and resilient energy market, adapt to the future and permanently change the way our energy business operates. We need an urgent step change to do that, “Breary wrote.

The number of UK domestic energy suppliers has surged from 12 since 2010, peaking at around 70 in 2018, as regulators and policy makers have fueled intensified competition.

However, large suppliers and consumer groups have long been concerned about the business model of many new entrants and whether some of their directors are suitable for running companies that offer such important services. I have been wondering.

Record rises in wholesale energy prices since the summer exposed serious flaws in the business models of many suppliers. Light Bulb, the largest unsuccessful supplier with 1.6 million customers, was bailed out by the government through a £ 1.7 billion taxpayer loan.

Brearley also promised “better use of regulatory data.” “To facilitate the transition to Net Zero, we need a system that enables sustainable markets,” he added.

Last week, Citizens’ Counseling was Ofgem “Catalog of errors” In market surveillance for the last 10 years. Consumer charities argued that regulators allowed a “culture of companies freely ignoring rules” and used customer credits built by direct debit payments to fund their business activities.

Blairy acknowledged criticism from civic counseling and promised, “As a regulator, we want to help our suppliers manage risk and eradicate bad practices when they find it.”

However, Ofgem’s CEO provides little comfort to consumers. He warned that when regulators raised the price limit to cover more than 15 million household claims in April next year, the “full impact” of rising wholesale energy prices would be conveyed to consumers. Ofgem reviews caps twice a year.

The wholesale price shock is “never over,” Blairy said. Continue to increase rapidly This week all over Europe.

“We can never completely protect consumers from the effects of rising wholesale energy prices. We expect these to be passed to the bill in April. This is for customers who are already under financial pressure. I’m very worried, “Brearley said. “We will do our best to manage this situation.”

Ofgem chief admits energy supplier market rules not ‘ready’ for wholesale price shock Source link Ofgem chief admits energy supplier market rules not ‘ready’ for wholesale price shock

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