Ofgem must live up to vows to protect money of energy consumers
The energy regulator Ofgem would like you to believe its new measures to ringfence customers’ deposits are “tough”. They certainly ought to be. About £400m of customer money evaporated with the failure of 28 energy suppliers since last September – the coffers only refilled via a charge on all households.
Unfortunately, the regulatory boast of toughness looks premature. A properly robust plan to prevent deposits being used like “an interest-free company credit card”, as Ofgem’s chief executive, Jonathan Brearley, put it, would be adopted immediately. Some suppliers would have to raise equity to replace deposits they have been using as working capital, but a determined regulator would insist that they do.
That is not Ofgem’s plan – or, at least, not yet. Instead, it has entered a world of consultation and evidence-gathering. On the one hand, the regulator says it is “minded to” introduce full ringfencing “as soon as possible”, by which it means the end of year. On the other, it wants to “better understand the magnitude of any risks to supplier business models”.
In other words, it is prepared to listen to pleas from some quarters that full and immediate protection of deposits would tip some suppliers over the edge. The document mentioned a figure of only 30% as the level of ringfencing that domestic suppliers “could be able to accommodate” this winter.
A 30% outcome – ringfencing-lite, as it were – would be a sign of regulatory weakness, not toughness. £94 has already been added to households’ bills to replace deposits and green levies that were missing at failed firms. It would be a disgrace if that figure were to rise again this winter.
Yes, Ofgem must follow due statutory process so as not to invite legal action. Ultimately,
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