An Ofgem director has quit their role after the watchdog imposed hundreds of pounds onto households energy bills this winter by changing its method for calculating the price cap.
Christine Farnish told The Times she had resigned because the regulator had not “struck the right balance between the interests of consumers and the interests of suppliers”.
She has now stepped down from her role after six years of service as a non-executive director.
Farnish said: “I resigned from the Ofgem board because I could not support a key decision to recover additional supplier costs from consumer bills this winter.”
Ofgem announced earlier this month it would enable suppliers to recoup wholesale energy hedging costs sooner.
The regulator argued this was vital to prevent more suppliers going bust, following the failure of 29 companies over the past year.
Market carnage has led to a clean-up bill for both Bulb Energy and the supplier of last resort process, both estimated in the multibillions.
Ofgem analysis reportedly suggested all bar two of the remaining suppliers could either go bust or exit the market if it didn’t make the changes.
Nevertheless, this comes at a cost for consumers, as Investec has predicted that the methodological change would add more than £400 to the level of the price cap in January,
Energy bills are expected to rise by staggering amounts in the months ahead, with the price cap expected to climb to £3,500 per year this October, and potentially exceed £5,000 per year in the spring.
The current cap – set at £1,971 per year – is already an all-time high.
Ofgem said they were thankful for Farnish’s “many years of devoted service” but defended their decision to adjust the cap methodology.
A spokesperson told City A.M.: “Due to this unprecedented energy crisis, Ofgem is having to make some incredibly difficult decisions where carefully balanced trade-offs are being weighed up all the time. But we always prioritise consumers’ needs both in the immediate and long term.”
It revealed that the rest of Ofgem’s board decided a shorter recovery period for energy costs was “in the best interest of consumers in the long term” as it would reduce the “very real risk” of more suppliers going bust.
This would “heap yet more costs onto bills” and “add unnecessary worry and concern at an already very difficult time.”
Last month, Ofgem faced stinging criticism from the BEIS Committee over its handling of the energy crisis – accusing the watchdog of failing to root out poorly managed suppliers prior to the crisis.
The Westminster group of MPs has raised doubts over its ability to clean up the market.
Ofgem is pressing ahead with a major package of regulatory reforms to shore up the financial resilience of the market.
It has already introduced financial stress tests and fit and proper person rules, alongside market stabilisation charges.
The watchdog is also considering ringfencing plans to protect customer credit balances.