Source · Select Committees · Public Accounts Committee
Twenty-Fifth Report - Regulation of energy suppliers
Public Accounts Committee
HC 41
Published 13 November 2022
Recommendations
2
Accepted
Ofgem did not strike the right balance between promoting competition in the energy suppliers market...
Recommendation
Ofgem did not strike the right balance between promoting competition in the energy suppliers market and ensuring energy suppliers were financially resilient. During the 2010s, Ofgem focused on attracting new firms to the sector to increase competition and reduce costs …
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Government Response Summary
The government agrees and states that Ofgem is developing new policies to create a more stable market, including proposals for an industry- wide minimum requirement for capital reserves. Ofgem is not proceeding with earlier proposals to ringfence customers’ credit balances but is instead consulting on new powers to direct ringfencing of credit balances, if needed.
HM Treasury
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3
Accepted
We are not convinced that Ofgem yet has the skills and capacity it needs to...
Recommendation
We are not convinced that Ofgem yet has the skills and capacity it needs to take a more proactive role in regulating the energy supplier market. Ofgem has around 1,400 staff and has submitted a bid to HM Treasury asking …
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Government Response Summary
The government agrees and describes increasing Ofgem's retail compliance staff, though it notes budgetary limitations. It highlights Ofgem's enforcement actions and the creation of a financial resilience compliance team. It also mentions a current market compliance review into supplier BCPs, with planned improvement action plans.
HM Treasury
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5
Accepted
It is unacceptable that many vulnerable customers, on top of having to pay higher energy...
Recommendation
It is unacceptable that many vulnerable customers, on top of having to pay higher energy prices, face extra challenges working with energy suppliers and accessing benefits designed to help people with their energy bills. Vulnerable customers are most exposed to …
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Government Response Summary
The government agrees and outlines existing schemes like the Energy Bills Support Scheme (EBSS) and the Energy Price Guarantee (EPG) to support vulnerable households. It also details efforts to ensure those with traditional prepayment meters receive vouchers, and alternative funding for those not eligible for EBSS.
HM Treasury
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6
Accepted
We are concerned that the Department and Ofgem do not yet have a clear vision...
Recommendation
We are concerned that the Department and Ofgem do not yet have a clear vision of how the energy retail market will work in the best interests of customers during the transition to net zero. The UK is seeking to …
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Government Response Summary
The government will work with consumer groups and industry from April 2024 to consider the best approach to consumer protection, including different forms of targeted discounts, as part of wider retail market reforms. Ofgem has developed a consumer interest framework (CIF) which is currently undergoing user research.
HM Treasury
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12
Accepted
Ofgem told us that in order to undertake the functions being asked of it and...
Recommendation
Ofgem told us that in order to undertake the functions being asked of it and to “play the role we want to play” in the sector, it would need different resources and different skills in future.22 It explained that its …
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Government Response Summary
Ofgem has undertaken a prioritisation exercise to flex resource where possible and in November 2022 approved an additional three full time equivalent staff for Retail Compliance focusing on financial resilience. Target implementation date: January 2023
HM Treasury
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21
Accepted
We asked Ofgem what it was doing to support vulnerable customers.
Recommendation
We asked Ofgem what it was doing to support vulnerable customers. Some stakeholders criticised Ofgem’s decision to add the SOLR cost levy to the electricity standing charge when customers cannot influence this cost by reducing their energy usage. Ofgem told …
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Government Response Summary
The government is using all the levers available to make sure that vulnerable customers benefit from the energy support available, including the Energy Bills Support Scheme (EBSS) and the Energy Price Guarantee (EPG).
HM Treasury
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Conclusions (2)
7
Conclusion
Accepted
We asked Ofgem how it ensured the needs of customers were considered in the event of an energy supplier failing. Ofgem told us that the SOLR and SAR processes had three main priorities: ensuring everyone was kept on supply; ensuring customers’ credit balances were protected; and ensuring disruption to customers …
Government Response Summary
Ofgem and BEIS continue to work closely to ensure consumers are protected in the event of energy supplier failures through the SoLR and SAR processes, and have already introduced changes to licence conditions, assessment processes, and monitoring of financial resilience.
10
Conclusion
Accepted
Following the supplier failures that occurred in 2021, Ofgem implemented further measures to strengthen the financial resilience of the market. In December 2021 Ofgem published an action plan on financial resilience that set out how Ofgem would improve its collection and reporting of information on suppliers, and also introduced stress …
Government Response Summary
Ofgem has already introduced changes to improve market stability, including changes to license conditions, an enhanced assessment process for supply licence applications, introduction of the Financial Resilience Action Plan, and new requirements on asset ownership.