Source · Select Committees · Business and Trade Committee
Recommendation 3
3
Acknowledged
Paragraph: 36
Oxera’s review of Ofgem’s performance to regulate the retail market raised serious and fundamental questions...
Conclusion
Oxera’s review of Ofgem’s performance to regulate the retail market raised serious and fundamental questions about the regulator’s ability to carry out its primary duties. We agree with its findings that Ofgem has no proper frameworks for defining and measuring what consumer interests are or what effective competition means, and that Ofgem failed to understand the business models of the suppliers it is required to regulate and the incentives created by its own regulatory regime. We are surprised and concerned by the absence of robust quantitative impact analyses, which should have been essential in underpinning key decisions on regulating the retail market. That important decisions on tackling risky supplier behaviour were taken by operational teams rather than the Board, demonstrates a complete failure in corporate governance.
Government Response Summary
Ofgem understands the Committee is eager to see the detail of its compliance and enforcement activity and actions and proposes to share this in due course, with a broader package of information requested in the Committee’s report, the annual report and Ofgem accounts in July following each financial year.
Paragraph Reference:
36
Government Response
Acknowledged
HM Government
Acknowledged
Ofgem understands the Committee is eager to see the detail of its compliance and enforcement activity and actions and proposes to share this in due course. of the compliance and enforcement action Ofgem has taken against licensed energy suppliers and a breakdown of the allocation of resources to this work. Ofgem expects to provide this as part of a broader package of information requested in the Committee’s report, the annual report and Ofgem accounts in July following each financial year. 20 Responses to the Committee’s Third Report of Session 2022–23 potential customers service compliance issues at an early stage, for example in response to reports that suppliers were refusing to offer customers their standard variable tariffs. unprecedented and unexpected rise in gas and electricity prices. Ofgem has reiterated its expectations of suppliers, particularly in relation to customer service and their treatment of the most vulnerable consumers. Ofgem has also made it clear that it intends to “raise the bar” on what is expected on financial and risk management. During 2022 Ofgem has engaged suppliers in areas including financial resilience, stress testing, asset control and launched a series of market compliance reviews. These activities and associated compliance engagement are ongoing but have already initiated enforcement action against TruEnergy, Foxglove, UK Energy Incubator Hub, Utilita and Scottish Power. Ofgem has also consulted on and implemented a number of changes to further protect consumers including modifications to licence conditions for new entrants and where suppliers reach certain milestones, updates to the financial responsibility and operational capacity principles and additional measures for reducing potential supplier failure and better protecting consumers money. Over the last three years, Ofgem’s compliance and enforcement teams have broadened their approach to tackle emerging issues as quickly as possible and better manage licensee behaviour, including through a greater use of alternative action and Orders. In this time Ofgem has issued over 60 Orders to suppliers as part of successful action on over 80 supplier cases with penalty/redress payments of over £37.5m, out of a broader figure of over £300m across all regulated parties. Ofgem has continued to strengthen its compliance and enforcement capacity with 60 Full Time Equivalent staff in position as of 30 September 2022.