Ofgem told to up their game

23 February 2015

British_Gas Ofgem have been told in no uncertain terms to 'get their act together' because, thus far, they've been pretty hopeless at getting everyone's energy bills lowered.

The regulator is coming under fire from the Commons Energy and Climate Change Committee and, even though there's been falls in bill prices and new price caps, MPs aren't impressed.

The trouble is that new rules from the regulator aren't tough enough and that those that manage the pipes and wires that dole out gas and electricity are still raking it in and not passing enough savings on to the customers.

Committee chairman Tim Yeo says: "Ofgem's chief executive told us that we would have to wait eight years to see whether value for money was being delivered for bill payers. This is too long for hard-pressed consumers to wait. Ofgem must get its act together and scrutinise these near monopolies more effectively. Simpler charging methodologies are needed to strengthen the market's ability to scrutinise costs and increase the pressure for greater cost-saving efficiencies."

"Barriers preventing smaller players from entering the market must be removed to drive down costs for consumers."

Energy companies pay network costs to use the aforementioned pipes and wires for distribution and transmission purposes and they are applied to bills. These costs amount to, roughly, 23% of a gas and electricity dual fuel bill. To sort this out, Ofgem introduced the RIIO system, designed to control network costs.

However, the committee have said that there's 'clear evidence' that the network companies were coining it in far more than expected. The committee said that "this suggests that the targets and incentives set by Ofgem are too low, barriers to market entry are high and that Ofgem needs to monitor RIIO more effectively and to equip RIIO with stronger, corrective measures."

"While we recognise that the new RIIO framework is an improvement on its predecessor, Ofgem has not yet created the conditions for the market to thrive and provide consumers with best value for money."

So what's the solution? Well, MPs would like to see a thorough study into replacing this system that is simpler and national, as the current one has a variety of regional charges and codes which make it more difficult to compare prices across networks. The committee would like Ofgem, and the Government, to start taking this seriously.

Of course, only last week, the Competition and Markets Authority said that they think we're all being overcharged to the tune of £234 a year for our gas and electricity.

TOPICS:   Utilities

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