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Energy Market Meltdown

From August - December 2021, 4 million households in the UK saw their energy company go bust. Citizens Advice, as the statutory energy consumer advocate, worked at the forefront of this volatility in the energy market to protect consumers as suppliers failed. We estimate that supplier failures since August 2021 will result in a multi-billion pound bill for consumers. 

This was a preventable crisis. The energy regulator Ofgem allowed unfit energy companies to trade with little penalty. Despite knowing about widespread problems in the market, Ofgem failed to act, leaving companies exposed to this year’s spike in wholesale prices. These mistakes contributed to the collapse of 28 firms in total in 2021.

Urgent changes are needed to fix the problems that led us here and restore trust in this essential service. Rules and enforcement needs to be rebalanced in favour of consumers to ensure this never happens again.

Why things need to change

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.

What we’re asking for

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.

What we’re saying