Irish boss of OFGEM lashes at ‘overcharging’

Irish boss of OFGEM lashes at ‘overcharging’
Dermot Nolan

The UK’s energy industry says suppliers are still overcharging customers despite ever decreasing wholesale costs

Dermot Nolan, who became Ofgem chief in March 2014, called for retail cuts and blamed the lack of a competitive market for consistently high prices.

Mr. Nolan, an economist and graduate of Trinity College Dublin (TCD) used to do the same energy regulator job in Ireland before being headhunted to take up the more than £200,000 a year post.

He has no power to make the big energy companies comply.

His comments come after reports that almost five million pensioners will have to ration their heating this winter because they cannot afford to pay their energy bills.

He encouraged customers to shop around for the best tailored deal and to consider switching provider in a bid to save money.

Irish boss of OFGEM lashes at ‘overcharging’

He told BBC Radio 4’s Today programme: “I think they are overcharging in many cases.

“I think what they are consciously doing is charging as high as they think people will get, which is an endemic feature of any market, but the main protection for consumers is a competitive market.”

Prime Minister David Cameron has also said publicly that energy prices are not falling quickly enough. Last year, the Secretary of State for Energy and Climate Change, Amber Rudd, said suppliers should respond to the fall in wholesale prices by cutting bills.

One of the first things Mr Nolan did in his role as head of Ofgem was refer the energy market to the Competition and Markets Authority (CMA).

This commission concluded that households were being overcharged by £1.2 billion a year and it is set to publish a report within the next two weeks.

Until other measures to improve competition are implemented, the CMA suggested that the 70 per cent of households suffering from expensive standard tariffs have their bills capped.

Mr Nolan has campaigned for a competitive energy market in the hope of lowering customers’ costs since he assumed his role at Ofgem. In addition to the referral to the CMA, he has looked to challenge the big six suppliers of British Gas, EDF Energy, npower, E.ON UK, Scottish Power and SSE.

Irish boss of OFGEM lashes at ‘overcharging’

He also began his speech at the Energy UK Annual Conference 2015 by acknowledging winter wholesale gas prices, which are at their lowest since 2009, and the impact this should have on consumers’ costs. Meanwhile, the chief executive of Energy UK, Lawrence Slade, leant his support to Ofgem and reinforced the opinion of utilising a varied market.

He told Today: “There are a number of different companies out there – we have got 34 different suppliers out there, there are a range of different tariffs to suit different people’s options.

“As Ofgem say, we are fully behind getting people engaging in this market and getting people on the best deal.” He pointed out, however, that a drop in wholesale costs shouldn’t necessarily mean sudden price cuts.

He added: “Yes, they do represent a big chunk – around 45 per cent of the average dual-fuel bill is wholesale costs.

“What isn’t coming out is all of the costs that are added on to consumers’ bills that are outside of a supplier’s control.

“Some of those costs over the last year have actually increased, in one case by 20 per cent.

“When you look at that, and you look at a world where we are actually decreasing our consumption of gas and electricity due to energy efficiency measures; that reduces quite substantially the room that any supplier has to reduce bills at a time when wholesale prices are coming down.”

According to comparison website, the cheapest dual-fuel deal available for a household with typical energy consumption is offered by GB Energy at £787 a year.

This is more than £300 cheaper than the average standard tariff of the big six suppliers.


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