Ofgem’s director has accused Ofgem of causing harm to households by allowing a large increase in the price limit. She then quit her job.
Christine Farnish, a former member of the watchdog, resigned after suppliers piled additional costs onto customers in winter. This contributed to an expected increase in the cap on electricity and gas bills from £1,971 in October to £3,523 in October.
Ms Farnish stated that Ofgem did not strike the right balance between consumers’ and suppliers’ interests.
She stated that regulators had an “overarching legal obligation to protect consumers’ interests”, and told the Times, “I resigned as Ofgem board since I couldn’t support a key decision to recover additional suppliers costs from consumer bills this Winter.”
These concerns resulted from the decision to let suppliers recoup certain energy expenses during winter, rather than spreading them over the year.
This move will assist energy companies in their financial stability, but analysts estimate it could add more to bills than £350 between October and March, thereby escalating the cost of living crisis.
As the regulator tries to deal with the aftermath of the unprecedented rise in gas prices triggered by Russia’s war against Ukraine, the resignation comes at an incredibly sensitive time.
Ofgem has been widely criticised for its historically loose approach to regulation, which allowed many inexperienced and underfunded suppliers to rush onto the market in recent years in an effort to encourage competition, only to fall last August when gas prices began to rise.
It wants to prevent another collapse by making changes to how the price cap for energy bills is calculated. This includes allowing suppliers to recover costs earlier for purchasing energy in advance.
A spokesman thanked Ms Farnish Wednesday night for her services and added: “The board determined that a shorter recovery period for energy cost was in the consumers’ best interests in the long-term by reducing the very real possibility of suppliers going bankrupt, which would add yet more costs to bills and create unnecessary worry and concern in an already difficult time.”
Ofgem has to make difficult decisions due to the unprecedented energy crisis. These trade-offs must be carefully considered. We always consider the long-term and immediate needs of consumers.
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