Energy price cap is expected to rise from £ 1,971 to £ 2,800 a year in October, Ofgem chief Rishi Sunak has said, raising pressure on the chancellor to help the struggling British through a deepening cost-of-living crisis.
Energy Regulator Chief Executive Jonathan Brearley told MPs for the Business, Energy and Industrial Strategy Committee he would write to the chancellor saying he expected the limit to be “around £ 2,800” when it is reviewed by the end of ‘this year. .
Gas prices were “higher and more volatile” in the wake of the Russian invasion of Ukraine, Brearley said.
“I know it’s a very distressing time for customers, but I need to be clear with this committee, with customers and with the government about the possible price implications for October.”
He noted that the wholesale prices used to calculate the Ofgem limit were uncertain and could change by October.
Mr Brearley’s warning came as petrol and diesel prices hit new highs and Rishi Sunak reportedly considered imposing an extraordinary tax on power generators that have made extraordinary profits while households of the UK are facing a cost of living crisis.
The chancellor has instructed Treasury officials to work on plans for a potential tax of more than £ 10bn on the profits from electricity generators, according to sources quoted by the Financial Times.
High prices have benefited power generators, but they have also led to the failure of dozens of suppliers.
Former Ofgem chief executive Dermot Nolan told lawmakers on Tuesday that the regulator could have stopped some of those mistakes “if we had moved faster”.
Nolan, who led Ofgem between 2014 and 2020, told the committee that he did not believe any regulatory regime could have prevented a large number of energy companies from failing due to the unprecedented rise in gas and oil prices. electricity.
He described recent increases in wholesale energy costs as a “100-year event” and argued that Ofgem had followed government requests to prioritize competition over regulatory oversight due to market dominance. of the “Big Six” companies.
Nolan claimed that Ofgem’s ability to supervise companies had been hampered because the implementation of the price cap had consumed “massive amounts of resources”.
When asked why he had allowed the Ofgem application team to shrink by a quarter between 2018 and 2021, Nolan said, “I don’t know. I literally don’t remember.”
The regulator has been widely criticized for allowing too many companies to set up with a minimum of controls over whether they had the necessary skills or were financially resilient enough to survive large price fluctuations.
Customers and taxpayers have been left in charge of dozens of bankrupt companies, some of which collapsed after being unable to adequately hedge against the risk of prices plummeting.
Nolan said that from 2015 “many” new companies entered the market under a “permissive” regime “encouraged by the government but also by a conscious decision by Ofgem’s board”.
Ofgem didn’t think he could just allow big, high-capital companies to enter the market, Nolan said. He admitted that companies had been able to fail without their owners facing financial harm.
However, from 2017/18 it became clear that “in certain cases companies had entered the market in a speculative way that was probably unreasonable and unfair, and we had to do something about it”.
Nolan said: “I don’t think any regime would have been entirely right for its purpose, but I accept that if we had moved faster we would have stopped some of the failures that have happened.”
Downing Street acknowledged that energy prices were a “major challenge” after Brearley suggested the limit could be raised to around £ 2,800 in October.
The official spokesman for the Prime Minister said that part of the government aid had been “gradually placed over the years”.
Meanwhile, fuel prices continued to rise to record highs, with new official figures showing that the average cost of a liter of petrol in UK yards on Monday was 167.7 pence.
That was up from 165.1 a week earlier. The average price of diesel on Monday was 181.14 p. per liter, an increase of 179.7 p. from last week.