Source · Select Committees · Business and Trade Committee
Recommendation 2
2
Accepted
Paragraph: 30
The lack of ongoing requirements for suppliers operating in the market allowed thinly capitalised companies...
Conclusion
The lack of ongoing requirements for suppliers operating in the market allowed thinly capitalised companies to rely on customers’ money to fuel business growth and operate with either no hedging or inadequate hedging against future energy prices. These companies took substantial risks to undercut responsible suppliers. The new rules put in place in early 2021 had no meaningful impact on suppliers’ practices. Ofgem has proved incompetent as the regulatory authority of this complex market, thereby costing taxpayers billions of pounds. The scale of failure and the cost exposure to taxpayers is only comparable to the financial crash of 2008.
Government Response Summary
Ofgem accepts the recommendations of the Oxera report in full, including the development of consumer interest and competition frameworks, and will seek further views from stakeholders.
Paragraph Reference:
30
Government Response
Accepted
HM Government
Accepted
Ofgem accepts the recommendations of the Oxera report in full, including the development of consumer interest and competition frameworks. An ex-ante framework to define and measure consumer interests was discussed with the Board in July 2022 and is being further developed based on their feedback. Ofgem published the proposed consumer interests framework as part of the Net Zero Britain report in July and will seek further views from stakeholders. Development of the competition framework has also been launched, with the intention to deliver both frameworks as soon as possible. Ofgem is committed to apply both frameworks to decision-making across all energy regulation. All relevant Board papers will be required to factor the consumer interest and effective competition frameworks into problem identification, options analysis, and conclusions and recommendations.