Value for Money
The energy supplier market
Published 22 June 2022
7 recommendations
Department for Business, Energy & Industrial Strategy
Business and industryCommercial marketsEnergy and environmentEnergy infrastructureHousehold energyRegulation
nao.org.uk
This report examines the recent exit of energy suppliers from the market and government’s role in managing the exits.
Recommendations (7)
Source: NAO Recommendations Tracker
Department for Energy Security and Net Zero; Ofgem
Rec 1
Accepted
Implemented
The Department and Ofgem together should:
a) in line with plans to revisit the Energy Retail Market Strategy, set a date by which they will review the changes needed to retail market regulation so that the supplier retail market aligns with the achievement of net zero. They should also establish interim milestones, including establishing by the end of 2022 high-level principles around the role suppliers will play in achieving net zero with which to test whether any short-term financial regulations are compatible with these principles;
Department for Energy Security and Net Zero; Ofgem
Rec 2
Accepted
Implemented
c) undertake a review of the costs and benefits of the price cap to inform decisions about the operation of the cap and alternative forms of price protection. This should include consideration of whether alternative types of price cap, such as one that focuses on vulnerable households or is based on the relative cost of different tariffs a supplier offers, better achieves its objectives for the retail market;
Department for Energy Security and Net Zero; Ofgem
Rec 3
Accepted
Implemented
b) establish a process by the end of 2022 for considering how new interventions in the retail market, like the price cap, would react in a wide range of scenarios, to mitigate the risk that interventions implemented at pace do not sufficiently consider the risks and unintended impacts;
Department for Energy Security and Net Zero; Ofgem
Rec 4
Accepted
Implemented
d) review and update the SOLR process in response to issues which have emerged over the last year. This includes issues that arose in its implementation, such as uncertainty over credit balances caused by delays in the transfer of customer information, and addressing the imbalance of risk between suppliers and consumers, which currently enables suppliers to exit from the market with little risk and even potentially to make a financial return.
Ofgem
Rec 5
Accepted
Work in Progress
Ofgem should: e) define and agree a set of a set of objectives for its regulation of the retail market against which it should review and report its performance at least annually. This should be a balanced set of measures based on available qualitative and quantitative information relating to consumer outcomes on issues such as price; quality of service; stability and predictability of tariffs; and delivery of the innovation needed to achieve net zero. This should include input from all the parts of Ofgem that interact with the retail market;
Ofgem
Rec 6
Accepted
Implemented
f) build regular review points into its current round of changes to the regulation of suppliers, including the new financial responsibility principles, for it to consider whether its approach continues to support its range of objectives, including the achievement of net zero and ensuring consumers do not overpay for energy. This should include consideration of whether it is continuing to balance adequately the need for financial resilience and enabling innovative business models to enter the market;
Ofgem
Rec 7
Accepted
Implemented
g) as part of its regular reviews, consider whether it is able to monitor adequately compliance with its new rules around financial responsibility. This should include considering whether it has sufficient understanding of the business models that suppliers use. It should also consider whether its powers and resources enable it to enforce the new rules and address any issues blocking
its ability to take rapid and effective compliance and enforcement action against suppliers where necessary.