Most people were shocked to learn that energy companies forced their way into customers’ homes to install expensive prepayment meters against their will. In February of this year, The temperature discovered that bailiffs hired by British Gas had broken into the homes of vulnerable people, including pensioners, disabled people and new mothers. The meters they have installed allow energy companies to no longer supply customers who are struggling to pay their bills and whose number increased considerably during the energy crisis last year. Some had hoped that strict regulations would soon follow to curb such practices.
So what did Ofgem, the UK electricity and gas regulator, come up with? This week it released a new voluntary code of practice for energy suppliers. Under this non-binding guideline, Ofgem states that unless a customer has a serious medical condition or is aged 85 or over, meters can continue to enter people’s homes.
The code has drawn ire from charities and other organizations concerned with fuel poverty and people with disabilities. Yet this is just the latest in a long line of Ofgem failures.
Ofgem has completely lost touch with the ordinary consumers it is charged with protecting. Based in Canary Wharf, London, it has 1,246 employees. Chief executive Jonathan Brearley enjoys a salary and pensions of over £250,000 a year. Yet despite its already large workforce, Ofgem has given £14m to KPMG, PwC and other consultancies in 2022 to seek additional help.
Ofgem’s handling of the energy crisis has been disastrous. Last year he had to shell out £2.6billion of taxpayers’ money to cover the costs of 29 failing energy companies under his watch. It also paid an extra £6.5billion to bail out Bulb Energy – only to have it bought by the government’s favorite energy supplier Octopus, which received an extra £4.5billion from Whitehall to sweeten the deal. ‘OK.
When petrol prices rose 80% last year, Ofcom watched. For a while, he also didn’t seem to notice the huge jump in the number of people switching to prepaid meters (from 380,000 to around 600,000 in 2022). It was only in November last year that Ofgem’s retail director, Neil Lawrence, announced he had been ‘made aware’ that energy providers were transforming smart meters in prepayment meters. The result, he noted, was that “some vulnerable consumers were not supplied”.
So what has he done for all those vulnerable people who have their energy cut off? He said he would write to the energy companies “to inform you of the situation and remind you of your obligations”. A week later, Ofgem insisted the big six energy companies had shown only “minor weaknesses” in their treatment of vulnerable customers. That was quite the understatement. When The temperature The story broke a few months later, Ofgem was caught completely off guard.
In February, Ofgem reported that customers were being tricked by energy companies when they tried to call their helplines. Up to 50% of customers gave up after their calls went unanswered. Ofgem’s response? “If necessary,” he said, he would now “force suppliers to make improvements to ensure they provide good customer service.” In addition, in the future, it could engage in “enhanced monitoring of suppliers with serious weaknesses” and undertake “robust compliance actions”.
This bureaucratic language alone betrays Ofgem’s distance. It shows how indifferent he is to those who are broke or vulnerable and have to live in cold houses. It is this recklessness that surely lies behind this week’s disappointing response to the prepayment meter scandal.
Above all, Ofgem is a monument to the failure of state regulation to compensate for market failures (see also: water and financial services). It was founded by Tony Blair in 2000, ostensibly to protect consumer interests. However, as early as 2010 it became clear precisely what Ofgem thinks this “consumer interest” should mean: “The interests of these consumers are their interests taken as a whole, including their interests in the reduction of gas to greenhouse effect. Generally speaking, the regulator decided on our behalf that green measures should take precedence over other considerations, such as cost or energy security. Although the 2010 document makes a nod to the need for “security of electricity and gas supply”, the truth is that green energy and energy security do not mix.
Thanks to Ofgem’s green obsession, it always tells us what it thinks is best for us in our homes – from heat pumps to hydrogen boilers. It also administers the Great British Insulation Scheme, which aims to improve the energy efficiency of drafty British housing and low-income housing. If Labor wins power in the next election and tries to deliver on its (implausible) promise to insulate 19 million homes in 10 years, it will be Ofgem overseeing the 19 million intrusions into our homes that this will require.
Ofgem has failed to do what most customers expect of an energy regulator: keep prices low and stamp out predatory practices. It protects no one but itself and the energy companies it is supposed to oversee. It is a handicap for Great Britain.
James Woudhuysen is Visiting Professor of Forecasting and Innovation at London South Bank University.
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