Energy price cap to hit £2,800 in October, Ofgem boss tells Sunak Business News

The energy price cap is set to rise from £1,971 to £2,800 a year in October, the Ofgem boss has told MPs.

The energy regulator’s chief executive, Jonathan Brearley, told the business, energy and industrial strategy committee that he would write to Rishi Sunak, telling the chancellor that he expects the cap to be “l ‘£2,800 order’.

It came as Rishi Sunak reportedly considered imposing a windfall tax on energy producers who have made windfall profits from high prices causing a cost of living crisis for UK households.

Former Ofgem chief executive Dermot Nolan admitted to MPs on Tuesday that the regulator could have prevented the bankruptcy of some of the dozens of energy companies “if we had acted faster”.

Mr Nolan, who led Ofgem between 2014 and 2020, told the committee he did not believe a regulatory regime could have prevented large numbers of energy companies from going bankrupt following an unprecedented rise gas and electricity prices.

He described recent increases in wholesale energy costs as a ‘once in a 100 year event’ and argued that Ofgem had followed government requests to prioritize competition over oversight regulation due to market dominance by the “Big Six”.

The regulator has been heavily criticized for allowing too many companies to set up shop with minimal checks on whether they have the required skills or are financially resilient enough to survive sharp price swings.

Mr Nolan said that from around 2015 ‘many’ new businesses entered the market under a ‘permissive’ regime ‘encouraged by the government but also by a conscious decision of the Ofgem board’ .

However, it became clear from 2017/18 that “in some cases companies entered the market speculatively which was probably not reasonable, not fair and we had to do something about it” .

Mr Nolan said: ‘I don’t think any diet would have been entirely fit for purpose, but I accept that if we had acted faster we would have stopped some of the failures that have occurred.’

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This notice was published: 2022-05-24 11:56:11

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