Ofgem runs the risk of “handing the market back to turgid incumbents” through over-burdening the energy sector with regulations, warned Octopus Energy Group (Octopus).
Greg Jackson, chief executive and founder of the UK’s fourth largest energy supplier, urged the regulator not to give in to “pressure from archaic companies, whose proposals will only drive up bills and supplier profits.”
This follows a raft of reforms put forward by Ofgem earlier this week to fix the energy sector, including plans to ringfence at least 30 per cent of customer credit balances.
This would mean customers’ money would have to be kept separate from the company’s commercial operations – protecting households if a firm goes bust.
However Octopus has warned this could add as much as £30 per year on to household bills and would do nothing to address poor management and hedging -which it viewed as the key driver of the energy crisis.
Jackson said: “Ofgem needs to implement simple, cost-effective solutions such as strict rules on hedging and management to keep prices down and foster tough competition.”
Ringfencing has become increasingly contentious: the proposal is backed by British-Gas owner Centrica, but opposed by multiple energy firms including Octopus and So Energy.
City A.M. understands Ovo Energy has also raised concerns over ringfencing requirements.
Jackson offered his thoughts on ringfencing following the latest report from the National Audit Office (NAO), which criticised Ofgem for failing to scrutinise the financial viability of suppliers before they entered the market.
This contributed to market carnage that saw 29 suppliers collapse, directly affecting over four million customers since last September.
He argued that Ofgem’s lack of financial scrutiny of suppliers meant the regulator “lumbered people with extra costs” – having handed the market to “a bunch of Del Boys.”
Jackson explained: “NAO’s warning is clear: Regulators need to be careful.”
Customers are set for a clean up bill of £2.7bn for the cost of onboarding customers to surviving suppliers from fallen firms, alongside a £3bn taxpayer charge for Bulb Energy’s fall into special administration last November.
The mess could even lead to household energy bills spiking to £3,000 per year this winter, with Cornwall Insight forecasting a £3,003 cap in January when energy demand will be at its highest in the depths of winter.