Financial regulation “needs to be tougher”, Ofgem’s boss told MPs on the Business, Energy and Industrial Strategy Committee. (Gareth Fuller/PA)
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The boss of Ofgem has admitted that he could have better protected households facing soaring energy bills by acting sooner to prevent a wave of suppliers collapsing.
Jonathan Brearley, the regulator’s chief executive, defended the energy price cap but said suppliers needed to be subject to tougher financial rules.
Financial regulation “needs to be tougher”, he told MPs on the Business, Energy and Industrial Strategy Committee.
“We need a retail sector that’s more resilient and more able to deal with financial shocks,” the Ofgem boss said.
“To be clear, chair, we accept that, had we done that sooner this would have been better for customers.”
He said that Ofgem “made sure that customers were supplied and credit balances were protected” but conceded that “our regulation needs to change”.
His comments came after 29 suppliers collapsed in recent months, with the costs passed on to all retail energy customers through a levy on bills.
Critics have blamed the regulator for being too lax when allowing new suppliers into the energy market.
Mr Brearley said that government’s priority had previously been to approve new suppliers and challenge the dominance of the Big Six providers.
He added: “It would have been better to have higher barriers to entry for new suppliers.”
Ofgem recently unveiled proposals for new rules requiring energy suppliers to hold more capital as a buffer against volatile wholesale prices.
While all suppliers have been hit by unprecedented spikes in global gas prices, some were left more vulnerable by putting in place inadequate measures to hedge their exposure.
More than four million customers have been moved to new suppliers after their previous provider ceased trading.
Mr Brearely defended the energy price cap, which will jump by 54 per cent in April to £1,971 for an average household.
“The price cap has worked it protected customers across winter and if you look back over its history it has made sure customers are paying no more than they need to for their energy,” Mr Brearley said.
“But without doubt it’s going to have to become more flexible and more adaptable now that we are in what’s wuite possibly a more volatile energy market.”