Ofgem blasted for failing to keep energy bills down


Ofgem has been ordered to “get its act together” to keep energy bills down for customers.
In a scathing attack on the regulator, the Commons Energy and Climate Change Committee said new price caps for power distribution companies that are intended to keep costs down have been too generous.
Network costs – i.e. the price for distributing and transmitting gas and electricity to homes and businesses – currently make up around 23% of a dual fuel bill.
These costs are passed on to consumers by gas and electricity suppliers who are charged by the network companies for using their transmission and distribution infrastructure.
Ofgem’s Chief Executive Dermot Nolan told the committee it could take eight years to see whether value for money was being delivered to bill payers.
Chair of the Committee Tim Yeo MP said: “This is too long for hard pressed consumers to wait.”
In 2013, Ofgem introduced a new price control system, known as RIIO, to ensure the costs were competitive and profits weren’t excessive but the MPs said “there is clear evidence” network companies are making higher profits than expected.
Mr Yeo added: “Network costs are one of the main reasons dual fuel bills have risen in recent years. Ofgem must get its act together and scrutinise these near monopolies more effectively.
“Simpler charging methodologies are needed to strengthen the market’s ability to scrutinise costs and increase the pressure for greater cost-saving efficiencies. Barriers preventing smaller players from entering the market must be removed to drive down costs for consumers.”
The news comes as the Competition and Markets Authority (CMA) revealed the UK’s Big Six companies could be overcharging energy customers by up to £234 a year.
The committee’s report also highlighted the complexity of the charging system, with a combination of codes and regional charges across the UK making it difficult to compare price and performance across the network companies.
Ofgem said it welcomes the debate and believes its regulations “has delivered value for money”.
A spokesperson added: “We are in the process of implementing a number of the actions the report highlights, including introducing more competition to networks and looking to increase the notification period of network charges.
“Additionally, we estimate that our innovation stimulus will see companies realise around £900 million of benefits to consumers in the next eight years.”
From July, energy suppliers will have to inform customers they could get a cheaper deal by switching to their partner brands.