Recommendation 20

Between July 2021 and May 2022, 29 energy suppliers, including Bulb energy, failed in large part due to lack of financial resilience during periods of market volatility. We asked Ofgem whether the failure of Bulb meant that the energy market was not working as intended, and what could have been done to prevent the worst of the damage caused. Ofgem recognised that the energy market had been under “enormous stress” both domestically and internationally, with energy prices being 15 times what they were in August 2022 which had resulted in interventions across Europe. However, Ofgem suggested that the need for interventions may have been mitigated if there had been better financial regulation of energy companies in place. Ofgem told us it was developing a new system that would provide assurance that the retail energy sector was in a much stronger place. Meanwhile, Ofgem told us that energy companies were required to manage their risks through hedging against the price cap. The NAO report highlighted that this helps energy companies manage any risks from increasing wholesale energy prices. It also explained that it was monitoring the financial resilience of energy suppliers through the use of stress testing in which energy suppliers were financially assessed based on how the company would manage under different energy pricing scenarios. Ofgem also told us that it considered that ensuring suppliers were financially resilient remained the best way to prevent future mass energy supplier collapses.44