From April energy bills could rise to almost £1900 a year, due to supplier collapses caused by a decade of regulatory mishaps and the rise of wholesale prices.
The energy regulator, Ofgem who’s slogan” making a positive difference for energy consumers” is responsible for a series of mistakes and missed opportunities that allowed the collapse of dozens of energy supplies and led to spiralling household bills leaving businesses and households in financial ruin before Christmas.
Citizen’s advice brands Ofgem’s failings as a catalogue of errors that will add an extra £94 a year to energy bills, to compensate for the £2.6 billion of cost generated from a wave of 26 supplier failures over the past four months. Citizen’s Advice says that Ofgem “failed to act against unfit energy suppliers for nearly a decade” despite warnings from the charity and many others. The charity has been lobbying for Ofgem, to increase checks on new suppliers since 2013, however rules on new entrants were not introduced until 2019 whereby dozens of living rooms and kitchen-based suppliers have already entered the market.
Ofgem brought in plans to toughen financial checks on small suppliers at the beginning of 2020, however it has only acted against one supplier despite evidence that many in the market relied on their customers’ credit balances to stay afloat.
These unregulated and unrestricted suppliers were allowed to accumulate debts which included thousands of pounds of customers money to fund growth.
Since October the price cap for 11 million households on standard tariffs has already risen to £1,277 a year, however, a watchdog report implies an expected increase of £614 to as much as £1,891 by the time of the next price cap review, in April 2022.
Dame Clare Moriarty, Citizens Advice chief executive, said:
“Energy customers are facing a multibillion-pound bill, in large part because Ofgem missed multiple opportunities to tackle rule-breaking by suppliers.”
Too little, too late?
Ofgem defend themselves by claiming that they are victims of a “black swan” event, that no one could have seen coming. A spokesperson for the regulator added we accept the energy market needs reform; however, the system was not designed for this kind of “black swan” event. Nevertheless, Ofgem has been repeatedly cautioned by industry experts, the media and Citizens Advice over the financial impact on all customers if unregulated suppliers were to collapse.
The regulator plans to set out changes in the next few weeks which “demonstrate the seriousness” with which it is tackling the “pace of change needed”, the spokesperson added. The spokesperson also welcomed the opportunity to work alongside all consumer groups, including Citizen Advice, “to protect energy consumers now and in the future.