The cost of last year’s energy shock

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The cost of last year’s energy shock

The result of last year's shock was that 2.4 million customers were automatically moved to a rival company when their own supplier collapsed. Citizens Advice said that they had to pay an extra 30 a month for the duration of their original contract as they were shifted to a more expensive tariff.

The cost of these failures totalled 2.7 billion dollars, a tab that was spread across all billpayers in Britain, not just those of the failed companies. This is before taking into account the multi-billion charge that households could face due to the collapse of Bulb Energy, which is in special administration.

The NAO said that Ofgem had decided to have a low bar approach for allowing new domestic energy suppliers into the market to encourage competition and choice for customers after the market had been dominated by six big companies.

By allowing so many suppliers with weak finances to enter the market, and failing to imagine that there could be a long period of volatility in energy prices, Ofgem allowed a market to develop that was vulnerable to large-scale shocks, said Gareth Davies, head of the NAO.

Consumers have suffered the brunt of supplier failures at a time when many households are already under significant financial strain due to bills going up to record levels. He said that a supplier market must be developed that works for consumers.

A regulators spokesman said that they were already working hard to address all of the issues raised. While the once-in-a-generation global energy price shock would have resulted in market exits under any regulatory framework, we have already been clear that suppliers and Ofgem's financial resilience regime were not robust enough.

We will continue to take a whole-market approach to ensure a fair and transparent market for consumers, as we move away from fossil fuels and towards affordable, green, home-grown energy, as a result of the fact that no regulators can guarantee companies won't fail in the future.