Ofgem director quits in protest at changes to price cap calculation


A board member of Ofgem has give up after accusing the power regulator of prioritising firms over shoppers.

Christine Farnish, a non-executive director at Ofgem, mentioned she had resigned as a result of the “regulator didn’t get the balance right and gave too much benefit to companies at the expense of consumers”. 

“It’s a judgment call. Answers aren’t particularly palatable but you want the interests of consumers to come first,” she mentioned.

Farnish’s departure was sparked by Ofgem’s resolution this month to change the way in which it calculates the power price cap, an adjustment that analysts have warned might add tons of of kilos to family payments.

Her resignation is an additional blow to the beleaguered regulator, which has been closely criticised by client teams, MPs and the National Audit Office over its dealing with of the power disaster.

Ofgem mentioned at the beginning of August that it was altering the methodology for the cap to allow suppliers to recoup the total prices of shopping for power for his or her prospects at present very excessive costs. The regulator insisted the changes had been crucial to stopping extra suppliers from going bust, after the pricey failure of about 30 firms because the begin of January 2021.

Analysts upgraded their estimates for the cap by tons of of kilos following the revisions. Martin Young at Investec warned the tweaks would push the cap to round £4,200 a yr in January, up from a earlier estimate of £3,725. The cap is presently £1,971 a yr primarily based on the consumption of a typical family.

Other analysts have since revised their forecasts larger in gentle of the mix of the change to methodology and additional will increase in wholesale fuel and electrical energy costs.

Ofgem confirmed the methodological changes at the identical time because it introduced it might replace the price cap each three months as opposed to twice a yr, which additionally sparked outcry from gas poverty campaigners.

Ed Miliband MP, Labour’s shadow local weather change and internet zero secretary, mentioned Farnish’s resignation was “further proof that the government is asleep at the wheel when it comes to the energy bills crisis”.

“We simply cannot allow the British people to suffer a further increase in bills.”

Farnish is a former chair of Consumer Focus in addition to a former non-executive director at the water regulator Ofwat.

Ofgem mentioned: “Due to this unprecedented energy crisis, Ofgem is having to make some incredibly difficult decisions where carefully balanced trade-offs are being weighed up all the time. But we always prioritise consumers’ needs both in the immediate and long term.

“The rest of the board decided a shorter recovery period for energy costs was in the best interest of consumers in the long term by reducing the very real risk of suppliers going bust, which would heap yet more costs on to bills and add unnecessary worry and concern at an already very difficult time.”

Ofgem has confronted criticism after dozens of smaller suppliers folded in the previous 18 months, including extra prices to family payments linked to the switch of their prospects to different firms.

Additional reporting by David Sheppard

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