The national audit office has put the blame for the collapse of the energy supply sector squarely at the feet of the energy regulator Ofgem.
The National Audit Office said Ofgem had allowed suppliers to enter the market and operate with weak financial resilience and allowed a market to develop that was vulnerable to large-scale shocks and where the risk largely rested with consumers, who would pick up the costs in the event of failure.
The result is that UK energy consumers will need to pay an estimated £2.7 billion to cover the costs of 28 energy suppliers failing since June 2021, in addition to the cost of running Bulb Energy. So far, the government has spent £900 million on an external administrator to run Bulb Energy and has budgeted an extra £1.0 billion to run it during 2022-23. The total cost of supporting Bulb Energy will not be known until the government sells it, or it exits special administration by other means.
Meg Hillier, chairperson of the Public Accounts Committee said: “Ofgem’s approach created an energy market built on shaky foundations. As a result, many companies simply collapsed under the shock of energy price increases.
“Once again, it’s the public who has to pay for the mistakes of those charged with protecting them. It’s unacceptable.”
The National Audit Office, along with Ofgem, must also ensure the supplier market recovers from its current state. The price cap has stifled some aspects of competition, which undermines the whole argument for deregulation.
Now is the time to reform the market, from bottom to top, it is very clearly not fit for purpose. Heating one’s home should not be a luxury in 2022, our economy and high street should not be on the brink of collapse, due to a runaway international commodity prices.
It’s time for a change, a big and bold change. It’s time for dare I say it? a revolution. The current version is clearly not working.