Ofgem has dismissed MPs’ accusations that the energy watchdog is a “toothless tiger”, pointing out it has no power to cap fuel bill increases.
Andrew Wright, interim chief executive of Ofgem, told the Energy and Climate Change select committee that the regulator had no brief to impose price limits on domestic energy bills but that it would be willing to act if directed by government.
“I completely understand why people feel frustrated and angry about rising energy bills,” he told the committee on Tuesday.
“There’s a deep mistrust of what energy companies do or say. Partly that reflects history and, in that respect, it is to some extent their own fault – there’s a legacy of years of aggressive doorstep selling . . . poor customer service, confusing tariffs – all these things have compounded that mistrust.”
The future of Ofgem itself has been cast into doubt by opposition leader Ed Miliband. In September, he committed a future Labour government to a 20-month energy price freeze saying that both the market and the regulator had “failed”.
Mr Wright said: “We think the retail market is not working as well as it should and that’s why we’ve put in place . . . reforms to try to make the market simpler, clearer and fairer.”
But he defended Ofgem, which had its energy price powers removed by the Labour last government.
“We work within a public policy framework, set by government, of competition and markets, and not price controls,” he said.
“In that framework, we don’t have the power to require companies to reduce their prices – so our job is to make competition and markets work effectively, and that is what we are trying to do.”
His remarks came the day after Ofgem published a report that showed a sharp rise in operating profits at the retail arms of Britain’s dominant big six energy suppliers. It calculated that margins rose from £35 to £53 a year on an average dual-fuel bill between 2010 and 2012.
Select committee member Ian Lavery, Labour MP for Wansbeck, warned that figure was set to rise to £105 this year after a further wave of price increases.
Mr Wright challenged MPs to reintroduce the right for Ofgem to impose price controls in the retail sector if they were dissatisfied with the regulator’s ability to rein in bills.