UK energy regulator Ofgem will have to change the way it regulates the market in the light of the current gas price crisis, Ofgem CEO Jonathan Brearley told Energy UK's annual conference in a speech Oct. 7.
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A dozen suppliers have exited the market this year, impacting two million customers, with more likely to follow, Brearley said.
S&P Global Platts assessed UK NBP day-ahead gas Oct. 6 at 232 pence/therm, down from 278 pence/therm Oct. 5 but up from 99.5 pence/therm Aug. 19.
"We accept that, as a result of the events of the past months, we will need to regulate the energy market differently. What is clear is that when high gas prices hit, many suppliers simply could not cope with such a sharp sustained shock," he said.
Ofgem had taken steps to make the market more resilient, limiting the number of new entrants coming into the market from a peak of 18 in 2017 to two last year, but further change was needed, he said.
"We will need to plan on the basis that shocks like this could happen again," he said.
That meant more focus on supplier business models and the risks suppliers carried.
Ofgem would also examine consequences for the wider design and implementation of the regulated household price cap.
"We need to move at pace. The increase in gas prices has put pressure on suppliers, and if prices subsequently fall fast, that will also bring its own challenges," the CEO said.
The tariff cap was raised by 12% from Oct. 1 to an average GBP1,277/yr in response to rising wholesale prices. The fear is that, if the current rally continues, the next hike from Apr. 1, 2022 will be much larger.
Ofgem would also examine the behavior of companies impacted by the gas price change, Brearley said.
"If we see sharp and unethical practices we will use the full extent of our powers, as will our colleagues in the Insolvency Agency and wider government agencies to tackle this," he said.