The energy regulator is responsible for a series of mistakes and missed opportunities that allowed dozens of energy suppliers to collapse and led to spiraling household bills, according to an organization report leading consumer rights charity.
Citizens Advice has criticized industry regulator Ofgem for failing to take action against rule-breaking suppliers for nearly 10 years despite growing concerns over the energy market.
In a damning report, the consumer watchdog warned that there was evidence of financial weakness in the energy market “long before this year’s crisis,” but said Ofgem had failed. ignored the warnings, meaning that households would bear the brunt of its “catalog of errors”. .
The market lost 26 suppliers amid record gas prices, potentially pushing household bills up by an additional £ 94 to cover the cost to businesses of supporting additional customers.
Clare Moriarty, chief executive of Citizens Advice, said households would face a multibillion pound bill “largely because Ofgem has missed multiple opportunities to regulate the market and tackle rule violations by Suppliers “.
The report found that Ofgem failed to act on repeated warnings from Citizens Advice about the precarious finances of a series of small suppliers who entered the energy market between 2010 and 2019.
It has also been slow to take action in recent years, even as industry customer service levels declined and financial instability increased, the report said.
“The recent increases in wholesale prices would have been difficult to manage under any circumstances, but they should not have resulted in the collapse of a third of the companies in the market,” Moriarty said.
The regulator laid out plans to tighten financial controls on small suppliers in early 2020, but only took action against one despite evidence that many in the market were relying on their customers’ credit balances to stay afloat.
It has also opened only one official customer service investigation in the past three years, after the number of people working on law enforcement in Ofgem fell by a quarter.
Citizens Advice called for an independent review of the causes of the market collapse, including regulation and Ofgem reforms, and action by the government and Ofgem to protect consumers from unnecessarily large increases in bills for pay the cost of supplier collapses.
“If consumers lack confidence in the energy market, or feel they are getting a bad deal, it will be even more difficult to go net zero. Reform is therefore vital for the future as well as to avoid the mistakes of the past, ”added Moriarty.
A spokesperson for Ofgem said the regulator had accepted that “the current system was not designed for this kind of extreme market event” and that the energy market needed to “reform and quickly “.
The regulator plans to present changes in the coming weeks that “demonstrate the seriousness” with which it is addressing the “pace of change needed,” added the spokesperson. The spokesperson also welcomed the opportunity to work alongside all consumer groups, including Citizen Advice, “to protect energy consumers today and in the future”.