Ofgem’s president told MPs that the cap on energy prices is expected to surge from £1,971 per year to £2,800 per year in October.
Energy regulator chief executive Jonathan Brearley told the Business, Energy and Industry Strategy Board that the limit would be “around £2,800” and would hurt households already struggling with the cost of living crisis.
Dermot Nolan, former CEO of Ofgem, said regulators could have prevented the sector’s failure if “we moved faster”.
Mr Nolan, who headed Ofgem between 2014 and 2020, told the Commission that he believes no regulatory regime could have prevented many energy companies from failing due to the unprecedented rise in gas and electricity prices.
He described a fivefold increase in wholesale energy costs as “once in 100 years,” and argued that Ofgem followed government requests to prioritize competition over regulatory oversight because the “big six” companies dominate the market.
Regulators have been heavily criticized for allowing too many companies to set up with minimal confirmation of whether they have the necessary skills or are financially resilient enough to survive large price fluctuations.
Mr Nolan said that since around 2015, “many” start-ups have entered the market under a “permit” regime, which is “incentivized by the government but also a conscious decision of the Ofgem Board”.
However, from 2017/18 it became clear that “in certain cases, companies entered the market in a speculative manner that was probably not rational and unfair, and we had to do something about it”.
“I don’t think any system would have been completely fit for purpose, but I do admit that some of the failures could have been prevented if we had moved sooner,” Nolan said.