Energy pricing and the future of the Energy Market
Business and Trade Committee
Closed
Inquiry
The Business, Energy and Industrial Strategy Committee is holding an inquiry on Energy pricing and the future of the Energy Market. The Committee’s inquiry on the retail energy market follows unprecedented surges in wholesale energy prices since the summer and with a number of firms going out of business, including …
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32
Recommendations
27
Conclusions
1
Report
4
Oral sessions
19
Letters
4
Events
Activity timeline 29 events
31 Jan
2023
2023
13 Oct
2022
2022
21 Sep
2022
2022
6 Sep
2022
2022
29 Jul
2022
2022
29 Jul
2022
2022
26 Jul
2022
2022
Report published
12 Jul
2022
2022
5 Jul
2022
2022
5 Jul
2022
2022
28 Jun
2022
2022
Oral evidence sessions 4 sessions
24 May 2022
View on parliament.uk
Daniel Osgood · Department for Business, Energy & Industrial Strategy
Dermot Nolan · Ofgem
Jonathan Brearley · Ofgem
Neil Kenward · Ofgem
Neil Lawrence · Ofgem
Rt Hon Kwasi Kwarteng MP · Department for Business, Energy and Industrial Strategy
19 Apr 2022
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Chris O’ Shea · Centrica
Hayden Wood · Bulb Energy
Jake Brown · Avro Energy
Keith Anderson · ScottishPower
Michael Lewis · E.ON
Simone Rossi · EDF
22 Mar 2022
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Energy pricing and the future of the energy market and the impact of energy prices industry
Dr Richard Leese · Energy Intensive Users Group
Gillian Cooper · Citizens Advice
Martin Lewis CBE · Money Saving Expert
Nishma Patel · Chemical Industries Association
Paul Wilson · Federation of Small Businesses
Rachel Fletcher · Ofwat
Rachel Fletcher · Octopus Energy
Simon Oscroft · So Energy
8 Feb 2022
View on parliament.uk
Oral evidence session
Emma Pinchbeck · Energy UK
Jonathan Brearley · Ofgem
Jonathan Brearley · Department for Energy Security and Net Zero
Jonathan Marshall · The Resolution Foundation
Neil Kenward · Ofgem
Neil Lawrence · Ofgem
Peter Smith · National Energy Action
Stephen Fitzpatrick · OVO Energy
Reports 1 report · click to expand
| Title | HC No. | Published | Items | Response |
|---|---|---|---|---|
| Third Report - Energy pricing and the future of the Energy Market | HC 236 | 26 Jul 2022 | 59 | Responded |
Recommendations & Conclusions
23 results
1
Conclusion
Acknowledged
Third Report - Energy pricing and …
Until June 2019, Ofgem granted energy suppliers a licence to operate in the market without...
Until June 2019, Ofgem granted energy suppliers a licence to operate in the market without ensuring they had access to sufficient levels of working capital, an acceptable business plan, or were run by individuals with relevant expertise. Ofgem’s delay to …
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Government Response
The Department for Business, Energy and Industrial Strategy has launched a cross-Government Affordability Sprint to share data and information on affordability, and Ofgem will support the new Prime Minister and Cabinet.
Department for Business and Trade
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3
Conclusion
Acknowledged
Third Report - Energy pricing and …
Oxera’s review of Ofgem’s performance to regulate the retail market raised serious and fundamental questions...
Oxera’s review of Ofgem’s performance to regulate the retail market raised serious and fundamental questions about the regulator’s ability to carry out its primary duties. We agree with its findings that Ofgem has no proper frameworks for defining and measuring …
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Government Response
Ofgem understands the Committee is eager to see the detail of its compliance and enforcement activity and actions and proposes to share this in due course, with a broader package of information requested in the Committee’s report, the annual report and Ofgem accounts in July following each financial year.
Department for Business and Trade
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6
Recommendation
Acknowledged
Third Report - Energy pricing and …
We call on Ofgem to make full and proper use of its enforcement and compliance...
We call on Ofgem to make full and proper use of its enforcement and compliance powers to clamp down on rule breaking by suppliers, particularly relating to customer service standards. Ofgem should work with the Government to ensure it has …
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Government Response
Ofgem has begun to consider the new powers that would be of benefit to consumers, including enforcement for unfit directors, the ability to appoint a third party to operate an energy supplier, the power to act against the parent company of a licensee, and making it quicker and easier to revoke a licence.
Department for Business and Trade
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7
Recommendation
Acknowledged
Third Report - Energy pricing and …
Whilst we have been reassured by Jonathan Brearley that changes are being made to the...
Whilst we have been reassured by Jonathan Brearley that changes are being made to the governance, leadership, and performance of Ofgem we remain deeply concerned that such negligent behaviour was able to take place for so long. If Dermot Nolan …
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Government Response
Ofgem and the Department have begun discussions to refresh the framework document and expect to publish it by December 2022.
Department for Business and Trade
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8
Conclusion
Acknowledged
Third Report - Energy pricing and …
Avro Energy improperly used customers’ money, including siphoning off customers’ cash to different businesses in...
Avro Energy improperly used customers’ money, including siphoning off customers’ cash to different businesses in the directors’ names, issuing loans to the directors, and paying poorly performing executives an unreasonably high salary. We were disappointed by the admission from Ofgem’s …
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Government Response
Ofgem acknowledges the committee's concerns and notes that it has provided views to the Government regarding the Strategy and Policy Statement.
Department for Business and Trade
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15
Recommendation
Acknowledged
Third Report - Energy pricing and …
We recommend that the Government urgently publishes its long-delayed Strategy and Policy Statement for Ofgem...
We recommend that the Government urgently publishes its long-delayed Strategy and Policy Statement for Ofgem to guide the regulator on how to manage the political and distributional trade-offs intrinsic to its responsibilities and clarify the split of responsibilities between Ofgem …
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Government Response
Ofgem has been analysing responses to its policy consultation on Strengthening Financial customer credit balances and stress-testing and will share its revised analysis with the Committee.
Department for Business and Trade
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17
Conclusion
Acknowledged
Third Report - Energy pricing and …
We are concerned that the costs of the Supplier of Last Resort process, which has...
We are concerned that the costs of the Supplier of Last Resort process, which has been added to regressive standing charges on electricity bills, has increased affordability challenges for the most vulnerable customers, at the most difficult time. This is …
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Government Response
Ofgem is reviewing its approach to the Supplier of Last Resort levy in light of the Energy Price Guarantee and will update the Committee in due course.
Department for Business and Trade
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21
Conclusion
Acknowledged
Third Report - Energy pricing and …
The Special Administration Regime has been used for the first time to deal with the...
The Special Administration Regime has been used for the first time to deal with the failure of Bulb Energy, leaving taxpayers exposed to billions of pounds worth of costs. The decision not to implement a hedging strategy may have led …
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Government Response
Ofgem is working with the Department to ensure the development of a clear and coordinated roadmap for the future energy retail market to support the achievement of an effective transition to net zero in line with the targets set by Government.
Department for Business and Trade
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24
Conclusion
Acknowledged
Third Report - Energy pricing and …
We support Ofgem’s objective to ensure energy suppliers are well-capitalised and prudently run.
We support Ofgem’s objective to ensure energy suppliers are well-capitalised and prudently run. If its plans to introduce a capital adequacy regime and improve its monitoring of suppliers’ approach to risk management are executed effectively, these measures could reduce the …
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Government Response
Ofgem continues to work with suppliers and the Department to prepare for the implementation of an increased Energy Bill Support Scheme and the Energy Price Guarantee, providing support in scheme design, guidance, enacting Licence Condition changes and monitoring supplier compliance.
Department for Business and Trade
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30
Conclusion
Acknowledged
Third Report - Energy pricing and …
The design of the energy price cap has contributed to recent instability in the supplier...
The design of the energy price cap has contributed to recent instability in the supplier market. Ofgem failed to properly stress test its design against a range of scenarios or consider how it interacted with its other regulations. The methodology …
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Government Response
Ofgem agrees with the Committee’s assessment of the benefits of Smart prepayment meters and is committed to ensuring that customers receive all the benefits of fully working and interoperable smart meters, but enforcement activity is currently focused on other areas of work due to resource constraints.
Department for Business and Trade
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32
Conclusion
Acknowledged
Third Report - Energy pricing and …
Ofgem should update the cost benefit analysis of its proposal for a quarterly price cap,...
Ofgem should update the cost benefit analysis of its proposal for a quarterly price cap, so it reflects the risk of prices increasing this January, in order for Ofgem, the Government, and Parliament to fully understand the potential impacts for …
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Government Response
Ofgem is reviewing its approach to the price cap in light of the Energy Price Guarantee and will update the Committee in due course.
Department for Business and Trade
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36
Conclusion
Acknowledged
Third Report - Energy pricing and …
The Government’s failure to regulate third-party intermediaries in combination with Ofgem’s failure to regulate energy...
The Government’s failure to regulate third-party intermediaries in combination with Ofgem’s failure to regulate energy suppliers led to third-party intermediaries promoting energy suppliers with flawed business models and unsustainable pricing. We are concerned that third-party intermediaries did not pay sufficient …
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Government Response
The government recognizes the risks to consumers from unregulated third-party intermediaries (TPIs), and is considering responses to a call for evidence while assessing the impact of recent market events. Ofgem has implemented reforms including requiring suppliers to only work with energy brokers signed up to a qualifying alternative dispute resolution scheme.
Department for Business and Trade
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38
Conclusion
Acknowledged
Third Report - Energy pricing and …
The previous Energy Retail Market Strategy was primarily driven by the objective to accelerate switching...
The previous Energy Retail Market Strategy was primarily driven by the objective to accelerate switching rates. The collapse of energy retailers demonstrated the flaws of this approach. The revised retail strategy will need to develop a market that differentiates not …
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Government Response
Ofgem is working with the Department to ensure the development of a clear and coordinated roadmap for the future energy retail market and the Department is expected to publish an update to their Energy Retail Market Strategy later this year.
Department for Business and Trade
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39
Recommendation
Acknowledged
Third Report - Energy pricing and …
The Department and Ofgem must urgently update the Energy Retail Market Strategy so that the...
The Department and Ofgem must urgently update the Energy Retail Market Strategy so that the supplier retail market aligns with our net zero target; this must include interim milestones and high-level principles about the role suppliers will play in achieving …
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Government Response
Ofgem is working with the Department to ensure the development of a clear and coordinated roadmap for the future energy retail market to support the achievement of an effective transition to net zero in line with the targets set by Government. The Department is expected to publish an update to their Energy Retail Market Strategy later this year, including further information about timescales for finalisation and implementation.
Department for Business and Trade
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42
Conclusion
Acknowledged
Third Report - Energy pricing and …
We note some delivery risks in ensuring the Energy Bills Support Scheme reaches vulnerable customers...
We note some delivery risks in ensuring the Energy Bills Support Scheme reaches vulnerable customers this winter, including certain types of tenants, customers using legacy prepayment meters, and those who are in debt to their energy provider.
Government Response
Ofgem continues to work with suppliers and the Department to prepare for the implementation of an increased Energy Bill Support Scheme and the Energy Price Guarantee, providing support in informing scheme design and guidance, enacting Licence Condition changes and monitoring supplier compliance.
Department for Business and Trade
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43
Recommendation
Acknowledged
Third Report - Energy pricing and …
We recommend that the Government ensures there are sufficient safeguards in place for tenants to...
We recommend that the Government ensures there are sufficient safeguards in place for tenants to benefit from the Energy Bills Support Scheme. We recommend that the Government pays the scheme via a negative standing charge to mitigate the risk of …
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Government Response
Ofgem continues to work with suppliers and the Department to prepare for both the implementation of an increased Energy Bill Support Scheme and the Energy Price Guarantee, providing support in scheme design, guidance, and monitoring supplier compliance.
Department for Business and Trade
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44
Recommendation
Acknowledged
Third Report - Energy pricing and …
While the Government committed to publishing a Fairness and Affordability call for evidence over a...
While the Government committed to publishing a Fairness and Affordability call for evidence over a year ago, this is yet to materialise. This is a vital piece of work which will need to address how to allocate energy policy costs …
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Government Response
Ofgem will share all available information on distributional effects of different policies with the Department and the Committee and intends to refresh the data used for distributional analysis, sharing updated assessments when available.
Department for Business and Trade
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45
Recommendation
Acknowledged
Third Report - Energy pricing and …
We recommend that the Government urgently publishes its overdue Fairness and Affordability call for evidence,...
We recommend that the Government urgently publishes its overdue Fairness and Affordability call for evidence, particularly in the context of rising energy prices. We recommend that the review includes a distributional analysis of the impact that recovering policy costs from …
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Government Response
Ofgem will share all available information on distributional effects of different policies with the Department and the Committee and intends to refresh the data used for distributional analysis.
Department for Business and Trade
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51
Recommendation
Acknowledged
Third Report - Energy pricing and …
We recommend that Ofgem urgently improves its data collection on self-disconnection and publishes this on...
We recommend that Ofgem urgently improves its data collection on self-disconnection and publishes this on a more frequent basis. We ask Ofgem to conduct an impact analysis on how expected increases to the price cap this winter will affect customers …
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Government Response
Ofgem introduced a quarterly request for information on prepayment meter customers, including self-disconnection, in Q4 2021 but is waiting to have at least one year of data before making it publicly available, possibly in early 2023; they also state the existing Ability to Pay rules require suppliers to assess a consumer’s ability to pay and agree an affordable payment plan.
Department for Business and Trade
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52
Conclusion
Acknowledged
Third Report - Energy pricing and …
Replacing legacy prepayment meters with smart prepayment meters is crucial to protecting vulnerable customers in...
Replacing legacy prepayment meters with smart prepayment meters is crucial to protecting vulnerable customers in the coming months because they allow suppliers to identify customers who are at risk of self-disconnection and provide immediate support. Yet we are hearing reports …
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Government Response
Ofgem agrees with the committee's assessment of the benefits of smart prepayment meters and is committed to ensuring customers receive those benefits, but enforcement activity is currently focused on other areas due to resource constraints and traditional meter installations are decreasing.
Department for Business and Trade
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53
Recommendation
Acknowledged
Third Report - Energy pricing and …
We call on Ofgem to enforce its New and Replacement Obligation in the supplier licence.
We call on Ofgem to enforce its New and Replacement Obligation in the supplier licence. We recommend that the Government makes it mandatory for all prepayment households to have a smart meter installed urgently, irrespective of supplier, so that 82 …
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Government Response
Ofgem agrees with the benefits of smart prepayment meters but is focused on other areas due to resource constraints; they expect new non-smart meter installations to decline as customers become more aware of the benefits and stocks of traditional equipment falls.
Department for Business and Trade
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56
Conclusion
Acknowledged
Third Report - Energy pricing and …
A systemic failure in regulation left the energy supply market, and ultimately taxpayers, more exposed...
A systemic failure in regulation left the energy supply market, and ultimately taxpayers, more exposed when the global wholesale energy crisis began. Some energy supplier businesses were allowed to behave in an entirely unacceptable way, without any consequence for their …
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Government Response
BEIS maintains a regular dialogue with Ofgem to review lessons learned and understand where policies can be enhanced to improve outcomes, and will work with Ofgem and relevant bodies to understand if there are any gaps within the current regime which prevent unfit conduct by energy company directors being appropriately addressed.
Department for Business and Trade
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57
Conclusion
Acknowledged
Third Report - Energy pricing and …
The energy price crisis is putting continued strain on the remaining suppliers in the market.
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 …
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Government Response
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.
Department for Business and Trade
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Government Response AI assessment · 59 of 32 classified
Accepted
20
Acknowledged
23
Deferred
7
Total
32 recs + 27 conclusions
Correspondence 19 letters
31 Jan 2023
Note from Ofgem incl. compliance and enforcement strategy, and detail for resourcing for compliance and enforcement
Parliament page
21 Sep 2022
To committee
Letter from the Minister for Energy, Clean Growth and Climate Change relating to the special administration of Bulb, 5 September 2022
Parliament page
6 Sep 2022
To committee
Letter from the Secretary of State relating to the special administration of Bulb Energy, 16 August 2022
Parliament page
29 Jul 2022
To committee
Letter from Chair to Rishi Sunak MP on energy bills, 26 July 2022
Parliament page
29 Jul 2022
To committee
Letter from Chair to Liz Truss MP on energy bills, 26 July 2022
Parliament page
12 Jul 2022
To committee
Letter from the Secretary of State relating to the Energy Security Bill, 6 July 2022
Parliament page
5 Jul 2022
To committee
Letter from the Minister for Energy, Clean Growth and Climate Change relating to the Special Administration of Bulb Energy, 28 June 2022
Parliament page
5 Jul 2022
To committee
Letter from the CEO of Ofgem relating to his appearance before the Committee last month, 27 June 2022
Parliament page
28 Jun 2022
To committee
Letter from the End Fuel Poverty Coalition to the Chief Executive of OFCOM relating to energy markets, 14 June 2022
Parliament page
28 Jun 2022
To committee
Letter from the Secretary of State to Alan Brown MP following up from the session on energy pricing, 20 June 2022
Parliament page
14 Jun 2022
To committee
Letter from the Chair to autoswitchers in the energy market, 26 May 2022
Parliament page
24 May 2022
To committee
Letter from the Minister of State for Energy, Clean Growth & Climate Change relating to Special Administration of Bulb, 17 May 2022
Parliament page
24 May 2022
From committee
Letter to the Chancellor relating to the projected increase in the energy price cap, 24 May 2022
Parliament page
24 May 2022
To committee
Letter from the CEO of Centrica following up from his appearance before the Committee, 11 May 2022
Parliament page
17 May 2022
Correspondence from the Minister for Energy, Clean Growth and Climate Change relating to the Special Administration of Bulb, 27 April 2022
Parliament page
20 Apr 2022
To committee
Letter from the Minister for Energy, Clean Growth and Climate Change relating to the special administration of Bulb Energy
Parliament page
19 Apr 2022
To committee
Letter from Lord Callanan on the Warm Home Discount and Energy Company Obligation schemes
Parliament page
1 Mar 2022
To committee
Letter from Ofgem in follow up to oral evidence on energy pricing and the UK energy market
Parliament page
1 Mar 2022
To committee
Letter from Centrica on the energy market and customer credit balances
Parliament page