Ofgem rules could keep energy bills high when wholesale gas prices drop

Simon Francis, the co-ordinator of the End Fuel Poverty Coalition, said: “Ofgem is seeking to make the energy market even more complex with pricing structures which may punish switching in the future.

“At the moment it is a moot point, with the market stagnant in the face of the energy bills crisis. But the fact this reform is needed is symbolic of the failure of a consumer energy system built on switching, which is costly for energy firms and inflates prices as customer acquisition drives up bills.

“As Citizens Advice suggests, this reform could lock people in or reduce the cost savings from switching, but the issue is bigger than this. We need to use this period instead to consider if the current market model works at all for low income and vulnerable households.”

A spokesman for Energy UK said: “After a period of huge upheaval for the retail sector with nearly 30 suppliers having exited the market since August – and the resulting costs expected to add £2.4 billion to customer bills – we support Ofgem’s attempts to ensure greater stability going forward, whatever level wholesale energy prices are at.

“In doing so, we fully realize that Ofgem has to make difficult trade-offs to ensure suppliers can recover the record high costs of buying energy on the wholesale market.”

An Ofgem spokesman said: “Our top priority is to protect consumers. Against a backdrop of continuing difficult market conditions, it is crucial we make sure that the innovative short-term measures we are putting in place are effective enough to keep the market fair and stable.

“These will protect consumers by incentivising suppliers to act prudently, thereby reducing the risk of suppliers leaving the market, and firmly puts in place a requirement for suppliers to make all tariffs available to new and existing customers.”