Citizens Advice slammed Ofgem yesterday for failing to act against “unfit energy suppliers for nearly a decade”.
It accused the energy market regulator of leaving the industry vulnerable to this year’s spike in wholesale prices.
The charity has pointed the finger at Ofgem for “mistakes and missed opportunities” which have left the battered energy sector vulnerable to surging prices – and which cost the average household £94 each.
It is now calling for an independent review of the market collapse, including an assessment of Ofgem’s approach to compliance and enforcement.
Government action to protect consumers for steep bill increases to pay for supplier failures is also being pushed by the organisation.
Since September, over 20 UK energy firms have collapsed hitting four million customers and leaving consumers with a £2.6bn bill alongside the £1.7bn in taxpayer funds required to tide fallen supplier Bulb through the winter.
Energy bills are set to rise by hundreds of pounds next April, if the consumer price cap is updated to reflect current industry conditions.
Ofgem has committed to reviewing the price cap as a mechanism with findings expected to be reported in February 2022.
Regulator criticised for historic failings as gas crisis deepens
Citizens Advice argued the problems in the sector pre-date the current crisis and extend beyond the contentious consumer price cap.
It argued Ofgem’s enforcement powers were underused even as customer service worsened in the years before the crisis – pointing to multiple examples.
Citizens Advice noted that Ofgem only opened one formal customer service investigation, and revealed it hasn’t stopped a supplier taking on new customers in relation to customer service concerns since February 2019.
It also revealed in the four years before the crisis the number of people working on enforcement at Ofgem fell by 25 per cent.
The charity suggested in its report that regulatory shortcomings led to a culture of non-compliance, with slow or missed action in response to evidence of licence breaches and on issues including accurate billing, access to phone lines for customers, and offering prepayment options.
In response to the criticism, Ofgem told City A.M. it accepted “the energy market needs reform and quickly” as the “current system was not designed for this sort of extreme market event”.
The market regulator explained its “top priority” is protecting consumers and that it understands the challenges households and businesses are facing in light of the unprecedented increase in global gas prices.
A spokesperson said: “We welcome the opportunity to work alongside all consumer groups, including Citizen Advice, as well as the Government and the energy industry to make the changes needed as we all share the same objective to protect energy consumers now and in the future.”
Nathan Piper, head of oil and gas research at Investec, has warned that the surge in gas prices which has plagued the UK energy industry will last until at least 2023.
He said that a combination of low storage levels, high demand and a lengthy approval process for the Nord Stream 2 pipeline meant prices would stay high until next winter and possibly beyond.