Extend Ofgem remit to protect businesses, MPs urge

Ofgem should be given an extended remit to protect non-domestic customers from high energy costs, a heavyweight committee of MPs has urged.

In a new report on energy bills support, the House of Commons Public Accounts Committee (PAC) has questioned whether Ofgem’s existing role in regulating the non-domestic energy sector is “fit for purpose” for managing future unexpected market shocks.

It adds that the government does not “fully understand [the] potential risk of insolvencies” among businesses and other non-domestic customers wrestling with high heat and power bills.

Following the replacement of the Energy Bills Relief Scheme (EBRS) with the less generous Energy Bills Discount Scheme (EBDS) in April, the committee warns that many non-domestic customers may not benefit from currently falling wholesale gas prices because they are “trapped” in fixed tariffs set during last summer’s spike.

More broadly, the non-domestic sector’s challenges with rising energy bills has exposed the lack of regulation by Ofgem and the government over how this segment of the market operates, the report says.

The committee recommends that the Department for Energy Security & Net Zero (DESNZ) should extend the regulator’s remit to create a fair competitive market in the non-domestic sector. It adds that the government should urgently consider rectifying these concerns through the Energy Bill, which is currently going through Parliament.

Ofgem currently has no powers to protect non-domestic customers from high energy bills, like those it possesses in the domestic market. Following pressure from the government, the regulator has been carrying out its own review of the non-domestic market that it intends to report on this summer.

The PAC also recommends that the Treasury’s response to the committee’s report should include an analysis of how planned cuts in business rates and falling energy price support will affect businesses in different sectors.

In addition, the report criticises the government for taking too long to get energy bills support to some of the most vulnerable and hard to reach customers.

Around 900,000 households only became eligible to apply for the Energy Bills Support Scheme Alternative Funding, which domestic consumers lacking a direct relationship with their supplier are eligible for, at the end of February, nearly five months after other consumers began receiving discounts.

The report also slams DESNZ for still not doing enough to ensure that energy bills support is reaching the two million consumers on prepayment meters and urges the government to probe which groups of such households have not redeemed their vouchers together with an action plan for increasing their uptake.

More broadly, the PAC says it is “very concerned” about the department’s lack of urgency in addressing the energy market failures, which have led to high energy bills for consumers.

It also calls for the government to release a timeline for its Review of Electricity Market Arrangements and explain how the exercise will help to boost the electricity sector’s resilience against future unexpected events, such as last year’s gas price spike.

And the PAC calls for this response to set how the government intends to be better prepared for future energy price shocks, its plans to ensure bills are affordable next winter and progress on introducing discounts for households on benefits.

Rocio Concha, director of policy and advocacy at Which?, said: “It’s deeply disappointing that it took too long to get support to those who need it most, and it’s also worrying that the government still lacks an effective mechanism to target financial support for energy bills in future.

“Which? research has previously found that low-income consumers will be left hundreds of pounds out of pocket on energy bills this financial year as the support from the Energy Bill Support Scheme falls away. The government urgently needs to introduce a properly targeted energy social tariff to ensure the most financially vulnerable are able to heat their homes.

“The government and energy suppliers should also ensure traditional prepayment meter customers are prioritised in smart meter rollouts where appropriate – as it should allow them to access any financial support automatically.”

Utility Week‘s Action on Bills campaign is calling for more support to be provided for vulnerable households this winter, while the government works out more targeted support such as a social tariff for next year.

Affordability is also one of the themes at Utility Week Forum this October. To find out more click here.