UK Inquiry Tracker

Regulation of energy suppliers

Public Accounts Committee Closed Inquiry

Opened: 9 Jun 2022 Closed: 24 Feb 2023 Parliament page

Since the summer of 2021 around 30 gas and electricity suppliers have exited the market in the ongoing energy supply and price crisis, affecting around four million customers. Most customers have been transferred to alternative suppliers through the Supplier of Last Resort process managed by Ofgem, the regulator for the … Read more

9 Recommendations

16 Conclusions

1 Report

1 Oral session

1 Event

Activity timeline 4 events

24 Feb
2023

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Twenty fifth report from Session 2022-23

13 Nov
2022

Report published

Twenty-Fifth Report - Regulation of energy suppliers

11 Jul
2022

Oral evidence

Regulation of energy suppliers

11 Jul
2022

Formal meeting (oral evidence session) · The Grimond Room, Portcullis House

Regulation of energy suppliers

Oral evidence sessions 1 session

11 Jul 2022

View on parliament.uk

Regulation of energy suppliers

Joanna Whittington · Department for Business, Energy and Industrial Strategy Jonathan Brearley · Ofgem Jonathan Brearley · Department for Energy Security and Net Zero Neil Lawrence · Ofgem Sarah Munby · Department for Business, Energy and Industrial Strategy

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
Twenty-Fifth Report - Regulation of energy suppliers	HC 41	13 Nov 2022	25	Responded

Recommendations & Conclusions

11 results

4 Recommendation Acknowledged

Twenty-Fifth Report - Regulation o…

The price cap is providing only very limited protection to households from increases in the...

The price cap is providing only very limited protection to households from increases in the wholesale price of energy. The price cap limits the rates suppliers can charge customers for the standing charge and for each unit of electricity and … Read more

Government Response

The government agrees and states that the price cap reflects the real cost of supplying energy. It notes that the Energy Price Guarantee (EPG) supersedes the cap as the main consumer price protection until March 2024, and it is developing a new approach to consumer protection in energy markets from April 2024 onwards.

HM Treasury

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1 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

On the basis of a report by the Comptroller and Auditor General, in July 2022...

On the basis of a report by the Comptroller and Auditor General, in July 2022 we took evidence from the Department for Business, Energy & Industrial Strategy (the Department) and the Office of Gas and Electricity Markets (Ofgem) on the … Read more

Government Response

The government agrees with the Committee’s recommendation and details ongoing work to improve market stability and limit the risk of high mutualised costs falling to customers, including changes to licence conditions and enhanced assessment process for supply licence applications.

HM Treasury

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9 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

Ofgem told us that issues began to emerge with the financial resilience of new entrants...

Ofgem told us that issues began to emerge with the financial resilience of new entrants in 2018 and in response it decided first to stop firms who did not have a resilient business model from entering the market, and then … Read more

Government Response

The government acknowledges the need for resources at Ofgem, noting an additional three staff for retail compliance. However, they indicate resource allocation is complex, with some funding earmarked for specific activities.

HM Treasury

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11 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

Ofgem’s proposals have drawn a range of reactions from stakeholders across the sector.17 We received...

Ofgem’s proposals have drawn a range of reactions from stakeholders across the sector.17 We received written evidence from suppliers who told us that they welcomed aspects of Ofgem’s proposals to improve financial resilience, such as raising capital adequacy requirements and … Read more

Government Response

Ofgem has already introduced a number of changes to improve market stability and limit the risk of high mutualised costs falling to customers, including changes to licence conditions, an enhanced assessment process for supply licence applications, the Financial Resilience Action Plan, and new requirements on asset ownership.

HM Treasury

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13 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

Ofgem’s headcount was approximately 1,400 in July 2022.

Ofgem’s headcount was approximately 1,400 in July 2022. This is higher than the 1,246 total staff Ofgem employed on average through 2021–22, and an increase of around 72% from the 816 total staff it employed during 2017–18.25 It had submitted … Read more

Government Response

HM Treasury

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14 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

We asked Ofgem whether it was able to deliver its plans for regulating energy suppliers...

We asked Ofgem whether it was able to deliver its plans for regulating energy suppliers using its existing legislation. Ofgem told us that it was testing its existing powers to assess whether it needed additional powers. For example, it explained … Read more We asked Ofgem whether it was able to deliver its plans for regulating energy suppliers using its existing legislation. Ofgem told us that it was testing its existing powers to assess whether it needed additional powers. For example, it explained that it may need more supervisory powers to allow it to undertake direct checks on companies it believed were not complying with regulations.27 Some stakeholders told us that they agree that Ofgem needed to be provided with the powers necessary to operate the new regime. For example, Centrica, E.ON and Citizens Advice highlighted Ofgem’s lack of authority over administrators brought in to manage insolvent firms.28 Other stakeholders however noted the risks of extending Ofgem’s powers. Octopus Energy in written evidence highlighted the burden suppliers face producing the significant volume of information Ofgem now requires.29 We received written evidence from Energy UK that told us the energy license already had an extensive range of terms and conditions and there is scope for Ofgem to make more use of existing powers, before adding more.30 For example, Citizens Advice told us that Ofgem had not enforced its own requirements that all suppliers develop a customer supply continuity plan that sets out how its customers will be managed in the event of the supplier failing. Citizens Advice explained that only one of the 20 suppliers that failed before November 2021 had such a plan.31 We asked Ofgem how many of the 26 suppliers left in the market had a customer supply continuity plan in place. Ofgem was unable to give us an exact number, but told us that having a plan was not the issue, but the quality of the plan and ensuring that it was able to stand up to scrutiny. It explained that it was therefore carrying out a customer service compliance review to look at the plans in detail.32 26 Q 100 27 Qq 72–73; C&AG’s Report, para 3.20 28 RES 0007, Centrica plc, 11 July 2022; RES 0006, Citizens Advice, 11 July 2022; RES 0005, E.ON 11 J Show less

Government Response

HM Treasury

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15 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

Energy customers are either on non-default tariffs, where they have made an active choice about...

Energy customers are either on non-default tariffs, where they have made an active choice about their energy tariff, usually fixing it at a certain rate, or on default tariffs, where they are more likely not to have done so. Since … Read more

Government Response

The government will develop a new approach to consumer protection in energy markets, which will apply from April 2024 onwards, including options such as social tariffs, as part of wider retail market reforms.

HM Treasury

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16 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

Ofgem sets the price cap every six months by calculating how much it costs an...

Ofgem sets the price cap every six months by calculating how much it costs an efficient supplier to provide gas and/or electricity to a customer.34 Ofgem told us that, when setting the cap, it had to reflect the cost at … Read more

Government Response

The government acknowledges the committee's recommendation regarding the price cap and states that they will develop a new approach to consumer protection in energy markets from April 2024 onwards, including considering options such as social tariffs.

HM Treasury

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19 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

The NAO found that the vast majority of costs resulting from supplier failures was to...

The NAO found that the vast majority of costs resulting from supplier failures was to make up the difference between what suppliers of last resort (SOLRs) could charge consumers under the cap and the cost of purchasing energy on the … Read more

Government Response

HM Treasury

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20 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

We were concerned that some energy customers have been disproportionately affected by the energy crisis.

We were concerned that some energy customers have been disproportionately affected by the energy crisis. For example, we noted that some vulnerable customers rely on prepayment meters but it costs more to administer the cost of energy paid by prepayment … Read more

Government Response

The government acknowledges that some energy customers have been disproportionately affected by the energy crisis and states it is using all available levers to ensure vulnerable customers benefit, highlighting the EBSS and alternative funding.

HM Treasury

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22 Conclusion Acknowledged

Twenty-Fifth Report - Regulation o…

We also asked the Department how it would ensure that customers still benefited if they...

We also asked the Department how it would ensure that customers still benefited if they were not the direct billpayers, for example those who live in park homes or in rented accommodation where the rent included bills. The Department recognised … Read more

Government Response

The government acknowledges the issue of ensuring all customers benefit from energy support, particularly those not direct billpayers, and states it is using all available levers to ensure vulnerable customers benefit, highlighting the EBSS and alternative funding.

HM Treasury

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Government Response AI assessment · 23 of 9 classified

Accepted 8

Acknowledged 11

Deferred 4

Total 9 recs + 16 conclusions