Energy firms warned Government that sector was fragile, MPs told

The boss of an energy industry body has said her team warned the Government and Ofgem that the sector was fragile at least two years ago.

Energy UK chief executive Emma Pinchbeck said a short-term crisis as gas prices spike has exposed some fault lines in the UK market and warned that even well-run suppliers might go bust.

“I took this job a year ago. When I was hired, the chairman of Energy UK said that your biggest challenge is going to be the vulnerability of the retail market,” she told MPs on the Business, Energy and Industrial Strategy Committee.

“And I know that for a year or more before that my team had been making the case to the regulator and the Government that the sector is fragile.

“There’s a short-term crisis here, which is in some ways out of our control – it’s to do with the gas prices – but it’s been exacerbated and arguably caused by our regulatory design.

“And that is a resilience and security of supply risk in the future. It’s terrible news for customers in the long run.”

She called for regulators and politicians to stop dismissing suppliers when they say the way the market is designed is flawed.

She added: “In any normal market we have companies that fail. The point is, right now, we think that good, well-run companies will fail. And that’s a function of both the pricing shock but also market design.”

She was speaking alongside Ofgem chief executive Jonathan Brearley

In a hearing where, at one point, his lights went off due to an automatic switch, Mr Brearley declined to put a number on how many customers are with a supplier at risk of collapse.

He said: “We do expect a large number of customers to be affected, we’ve already seen hundreds of thousands of customers affected, that may well go well above that.

“It’s very hard for me to put a figure on it.

“It’s not unusual for suppliers to go out of the market. I think what is different this time is that dramatic change in the costs that those suppliers are facing.

“We do expect more (suppliers) not to be able to face the circumstances we’re in, but it’s genuinely hard to say more than that, partly because that means predicting what may happen to the gas price.”