Market Meltdown: How regulatory failures landed us with a multi-billion pound bill
Ofgem allowed unfit and unsustainable energy companies to trade with little penalty. Despite knowing about widespread problems in the market, it failed to take meaningful action.
Our report shows that:
- Almost 4 million households have seen their supplier fail since August 2021 alone, with 28 failures this year.
- Supplier failures since Aug 2021 will cost consumers £2.6 billion - around £94 per customer from 2022. Government has set aside a further £1.7 billion of taxpayer money for Bulb’s failure.
- Citizens Advice estimate that consumers whose supplier failed and were moved to a new supplier saw average price rises of £30/month.
- Consumers of failed suppliers are also paying for energy market turbulence with billing delays, confusion and lost debt protections.
- 40% of people who’ve heard about supplier failures are less likely to switch supplier in future as a result.
From 2010 onwards, dozens of companies entered the market with limited checks. Some offered good service to consumers, but others were poorly prepared. Despite warnings from Citizens Advice and others, it was only in 2019 that Ofgem brought in new rules on market entry, and in 2021 to improve financial resilience - reforms that came far too slow to prevent the collapse we’ve seen. Ofgem’s regulatory failings also led to a culture where companies were free to flout the rules.
Ofgem and the Government must act to fix the problems that led us here and restore consumer confidence in the market:
- There should be an independent review of the causes of the market turmoil which considers the role of delays in policy changes, Ofgem’s approach to compliance and enforcement, and recommends improvements.
- Ofgem should introduce a new consumer duty, similar to that being introduced in financial services, which would put the onus on companies to ensure good consumer outcomes in future.
- Consumers should be protected from immediate bill hikes resulting from recent supplier failures
- Ofgem and the Government should develop clear strategies for the retail market and its role in supporting decarbonisation. These should consider how to enable consumer engagement and innovation in a more consolidated market.