Recommendation 2

Ofgem’s failure to ensure that energy suppliers were financially resilient resulted in costs to energy consumers and taxpayers when these energy companies failed. To encourage new suppliers into the market and encourage price competition and innovation, Ofgem took a ‘low bar’ approach to licencing new retail energy suppliers. Between 2010 and May 2022, at least 73 new energy suppliers entered the market. However, over the same period, at least 65 suppliers exited the market. Between July 2021 and May 2022, 29 energy suppliers (including Bulb) failed, affecting nearly four million households. This has resulted in an estimated cost of £2.7 billion to use the SoLR process to transfer customers over to new energy suppliers, in addition to the estimated cost of £3.02 billion of taxpayer funding for placing Bulb in SAR and supporting its wholesale energy requirements up until 31 March 2023. Government expects to recover £2.96 billion of the taxpayer funding for the Bulb process from Octopus in September 2024. If Octopus repays the £2.96 billion in full, the government will be left with an estimated shortfall of £246 million (including a charge for accrued interest) which the government expects to recover from energy consumers. Ofgem asserts that it has introduced measures to test the financial resilience of energy suppliers and the standard of service they provide more effectively, and that these will apply to all suppliers in future. Ofgem considers 6 Bulb Energy that monitoring and assessing the financial and operational resilience of suppliers is the best means to address the risk of supplier failure and hence reduce the burden on taxpayers and energy consumers. But this needs to be balanced with the need to promote healthy competition between suppliers. Recommendation 2: By the end of the year, Ofgem and the Department should write to the Committee, setting out the steps they are taking to promote healthy competition in the energy market while only granting licences t