Ofgem’s Chief Executive, Jonathan Brearley, made it clear that the financial practices seen before the energy crisis would not be tolerated.
The energy price cap, which is currently set at around £2,100 for a typical household, has returned to protect consumers from the rising costs of gas and electricity. This comes after the government’s energy price guarantee ended, reflecting a reduction in the cost of wholesale energy since the peaks observed in 2022 and early 2023.
Around the time of Russia’s invasion of Ukraine, approximately 20 energy suppliers collapsed. In response, Ofgem introduced new rules in November last year to strengthen the resilience of energy firms’ business models. These rules require companies to hold more cash or assets to minimize the risk of going bankrupt.
Mr. Brearley emphasized the need for energy firms to learn from the lessons of the energy crisis and act responsibly. He stated that while a reasonable profit is important for a sustainable and competitive market, there can be no return to the practices of the past. Energy suppliers must ensure they are financially robust, capable of absorbing potential losses and meeting Ofgem’s new capital requirements before considering dividend payouts.
An energy industry consultancy predicted that the price cap will further decrease to £1,978.33 from October, based on current market pricing and Ofgem’s criteria.
Ofgem’s stance aims to create a more resilient and responsible energy sector, prioritizing the interests and well-being of households. By discouraging practices that prioritize shareholders over customers, Ofgem seeks to promote a sustainable and competitive market that benefits consumers in the long run.
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