THE head of the UK’s energy regulator Ofgem showed a “very disappointing” lack of awareness of Scottish consumers’ situation when giving evidence to a House of Commons committee on energy prices, Scottish MP Alan Brown said yesterday.
Ofgem chief executive officer Jonathan Brearley admitted costly failures by his organisation – but blamed them on political choices made by the Conservative Government at Westminster.
He also admitted that picking up the lost credit balances swallowed up by companies going bust this year will cost UK consumers at least £200 million – 10% of the rise in the domestic energy cap.
Brown of the SNP told the committee that people in the Highlands and Islands “are paying a lot more money” – in many cases already more than the quoted average of £2000 a year for their energy. They are being charged more per unit for power and have to use more of it to heat their homes.
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He asked: “Yet the Highlands and Islands is obviously an exporter in terms of generation of electricity. Is that not an anomaly that Ofgem as the regulator should be looking at or discussing with Government, in terms of that penalty that is applied to customers?”
But Brearley, and Ofgem’s director of strategy and decarbonisation Neil Kenward, both admitted they did not have a grasp of the detail and said they would look into the issue and get back.
Brown responded to the Sunday National yesterday: “I was very disappointed with the response that they had not heard of the issue.
“I have raised this several times in parliament as has my colleague Drew Hendry has campaigned hard on the matter.”
Business insiders say that the way that Ofgem has looked after the UK’s energy sector in recent years has discriminated against Scotland in terms of both suppliers and consumers – Ofgem has charged renewables companies based in the Highlands to supply electricity to the grid while paying those based in the south of England.
Ofgem has presided over a collapse of 29 energy suppliers in the last year – millions of pounds in consumer credit have vanished in these companies’ bad debt. Committee chair, Labour MP Darren Jones. asked: “Do you think that it is right that consumers should have to pay back through their energy bills, of their own money that has gone because of the bankruptcy of energy companies that were not regulated properly?”
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Brearley said: “I agree that, with hindsight, we should have ring-fenced customer credit balances more firmly.”
Conservative MP Richard Fuller asked: “What are the consequences for those bad calls for you and your colleagues? You have made assessments of £200 million that has been lost and admitted that you will get it back through customers.
"You are the regulators and, between the top five of you, you rake in £1m a year and you have £2m of cash benefit in your pension funds. You have talked about fairness. I am wondering what the consequences are for you and your team for these bad calls?”
Brearley said many of the regulator’s choices had been politically motivated. “Ultimately, Gema is the decision-making body for Ofgem. There was a clear ambition to diversify supply. Frankly, that was not just a Gema or an Ofgem ambition. That was an ambition that was shared with the Government at the time.”
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