Households should get energy at an affordable price, says former Ofgem director | Energy industry
The former director of Ofgem, who dramatically resigned from her post last month, called for all households to be provided with energy at a fixed cost for “basic essential use”.
Christine Farnish, who quit the energy regulator last month accusing it of favoring business over consumers, said households should be entitled to a “universal” regulated energy price.
Writing exclusively for the Guardian, Farnish said: “A modest amount of energy could be supplied universally at a regulated price, which would avoid sudden price shocks, for basic essential use. The costs of this operation should be smoothed over time.
“The net costs could be financed by distributing energy benefits to upstream markets. It could be provided either by current suppliers or by others through a competitive franchise process.
Farnish said Ofgem, or a new dedicated body, could set the level of the base energy allowance, while a smartphone app could be used to help consumers track their energy use. She also proposed measures to stimulate competition in the market and suggested removing the permanent charges on consumer bills.
Farnish said the regulator ‘gave businesses too much advantage at the expense of consumers’ when she resigned from Ofgem last month. The regulator has been accused of contributing to the bankruptcy of 29 energy suppliers since mid-2021, and consumer rights expert Martin Lewis has accused it of “selling consumers downstream”.
Ofgem last month set the next industry price cap from October at £3,549, up 80% from £1,971.
New Prime Minister Liz Truss is expected to announce a £2,500 energy bill freeze on Thursday, funded by public borrowing.
Farnish said the intervention was likely to be a “huge and expensive sticking bandage” and that long-term market reform was needed.
She said the “permanent regressive tax”, which is paid by all households to cover the cost of supplying energy to a property, should be scrapped, replaced by usage-based charges.
“I’m not sure the permanent charge is suitable for the modern world. Imagine trying to reduce your energy to an affordable level and having an unavoidable and uncontrollable permanent load on your meter,” she wrote. “The more someone would use the network, the more they would pay, which seems fair enough.”
She also said costs could be taken out of the industry by streamlining regulations, allowing companies to invest in innovation.