Ministers, one fears, still haven’t grasped scale of Ofgem’s regulatory failure

theguardian.com:

“If Dermot Nolan was still in post, we would be calling for his dismissal,” say the MPs on the business select committee, in their report on the energy sector, about the former chief executive of regulator Ofgem. And they would be right to do so. Top billing in the MPs’ report was taken by the need for the government to boost financial support for poorer households when the energy price cap rises again in October, but the other key conclusion was the damning verdict on the pre-crisis performance of Ofgem.

That is not surprising, of course, but it needed to be said with suitable force: “Ofgem has proved incompetent as the regulatory authority of this complex market, thereby costing taxpayers billions of pounds. The scale of failure and the cost exposure to taxpayers is only comparable to the financial crash of 2008.”

So, no, a chief executive of Ofgem of that era could not have survived the catalogue of failures. The regulatory body let thinly capitalised companies operate with inadequate financial controls and didn’t stop to ask if a pro-competition approach was storing up trouble, which duly arrived when wholesale energy prices soared in 2021. Twenty-nine firms have failed so far, with the cost of the mess rebounding on consumers in the form of an extra £94 on bills. The failure of the obscure Avro Energy alone, a loss-making company paying small fortunes to its inexperienced directors, is reckoned to have cost £700m.

You might assume such a colossal failure of oversight would prompt politicians to pause and ask fundamental questions about the entire regulatory architecture of the past 20 years. After all, that is what happened after the financial and banking crash. George Osborne, chancellor at the time, abolished the