Ofgem not a 'toothless tiger' in fight against rising energy prices, insists boss

Andrew Wright tells MPs he agrees with consumers who think the retail energy market is not working well

Ofgem boss Andrew Wright says he understands public anger at rising energy prices but has denied his organisation is guilty of "feeble regulation".

Wright acknowledged "deep distrust" of the big six energy companies – British Gas, npower, SSE, Scottish Power, E.ON and EDF – as some customers face price rises of more than 10% as winter kicks in.

Addressing MPs on the Commons energy and climate change committee, Wright said rising prices, years of aggressive doorstep selling, confusing tariffs and complexity when consumers wanted to switch providers had all created negative perceptions of the industry.

"I completely understand why people feel frustrated and angry about rising energy bills. Prices have more than doubled over the last 10 years at a time when incomes have been squeezed, and consumers are not convinced that price increases that they see are either fair or justified," he said.

"Consumers have a perception that the market is not working well and that's something that we agree with. We think the retail market is not working as well as it should do."

When asked whether Ofgem was a "toothless tiger", failing to address rising prices and accusations of unfair profit taking among companies, he said it was acting within its statutory regulatory framework and rejected the idea he was supportive of the rises.

"I never said it was OK. I have not said this level of profit is right or acceptable. If companies imply we think 5% is right, we've never said that."

He said that politicians were right to debate the issue of rising energy price rises but when questioned about Labour leader Ed Miliband's promise to freeze prices he did not appear to be enthusiastic.

"The sort of things we would consider are, does it have an adverse impact on consumers and on the investment that's needed?

"It is obviously necessary to allow companies to recover the revenues that they need to be able to run their businesses effectively. They should have no guarantee of profits but an efficient business serving customers should be able to recover the costs that they incur. So any arrangement that doesn't allow them to do that potentially puts at risk investment in the industry."

His comments came a day after Ofgem published a report which found that profits per customer rose by 77% last year, from £30 to £53, driven by higher prices and increased demand for heating during last year's cold weather.

The average profit margin for supplying energy to households in 2012 was 4.3%, up from 2.8% in 2011, with total profits from supplying energy to households and businesses rising from £1.25bn to £1.6bn last year.

Article Source : http://www.guardian.co.uk
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