Ofgem has proved “incompetent as the regulatory authority” according to a new report from the Department of Business, Energy and Industrial Strategy (BEIS) select committee.
The Energy pricing and the future of the Energy Market report finds that suppliers were allowed to enter the market without access to sufficient capital or acceptable business plans, and were run by individuals without relevant expertise.
“The regulator enabled poorly capitalised suppliers to be overly reliant on customer credit balances and operate with inadequate hedging, leaving the market ill-equipped to absorb wholesale price increases,” states the report, which can be read in full here.
“The rules that were in place were not enforced and Ofgem did not understand the business models of the suppliers it is mandated to supervise.”
Additionally, the government prioritised competition over effective market regulation, overlooking Ofgem’s lack of supervision of the energy market.
“While the unprecedented rise in global gas prices would have resulted in market exits under almost any regulatory system, we have been clear and transparent about the fact that suppliers and Ofgem’s previous financial resilience regime were not robust enough. This contributed to some of the supplier failures since August 2021,” Ofgem stated in response to the report.
Read more: Current+
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