Source · Select Committees · Business and Trade Committee
Recommendation 57
57
Acknowledged
Paragraph: 219
The energy price crisis is putting continued strain on the remaining suppliers in the market.
Conclusion
The energy price crisis is putting continued strain on the remaining suppliers in the market. At the same time, Ofgem is proceeding with a programme of major regulatory reform with the objective to reverse its previous litany of shortcomings and shore up the financial resilience of the market. However, if its policies are poorly designed and executed, they could have the opposing effect and further destabilise the market, at additional cost to households and/or taxpayers. We remain unconvinced of Ofgem’s ability to undertake regulatory reform in a way that effectively manages the complex trade-offs or range of business models in the market. We are concerned that it will address its inability to monitor and enforce principle-based rules by implementing an overly prescriptive regulatory regime. We have outlined a wide range of actions Ofgem should take to improve its performance and we will provide greater oversight of the regulator in the future.
Government response summary AI-generated
The government acknowledges Ofgem's efforts to improve the robustness of the energy supply market, including an independent review into supplier failures and a new Review of UK Energy Regulation, and details its own oversight of Ofgem.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
219
Government Response
Acknowledged
HM Government · verbatim extract
Acknowledged
Ofgem launched its supplier stress testing regime earlier in 2022 and is analysing the responses to the second iteration ahead of winter. This forms part of Ofgem’s standard monitoring of supplier risk management practices, supported by regular requests for information such as hedging and financial data and proactive engagement with suppliers. Ofgem proposed to introduce a capital adequacy framework in the policy consultation on Strengthening Finance Resilience. This framework would build on this monitoring and engagement to introduce specific capital adequacy requirements for suppliers. Ofgem plans to develop an adaptive framework to ensure the right level of resilience, while minimising unnecessary burden and barriers to innovation. Ofgem has been expanding its capabilities in response to the energy crisis and plans to build on this to deliver a new capital adequacy regime. Implementation will be considered as part of the detailed plans for this policy and reflected appropriately in the annual Forward Work Programme.
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