Energy Market UK NAO ReportThe scope of the report covers the nature and regulation of the energy supply market, how Ofgem and BEIS have handled supplier exits and their cost, and how fgem’s regulation of the energy supply market has contributed to the exits.

Energy Market UK – The National Audit Office (NAO) recently published a report on the energy supplier market, which aims to set out the facts regarding the recent energy supplier exits and to evaluate the role of Ofgem and BEIS in the events leading to the exits and how well they handled them.

The scope of the report covers the nature and regulation of the energy supply market, how Ofgem and BEIS have handled supplier exits and their cost, and how ofgem’s regulation of the energy supply market has contributed to the exits.

It notes that 29 suppliers failed between July 2021 and May 2022, with Ofgem currently estimating that the final costs to consumers will be £2.7bn through the Supplier of Last Resort (SoLR) process.

The report concludes that while Ofgem could not have prevented the increase in wholesale prices in 2021 from affecting consumers, it did not do enough in the preceding years it to ensure the energy supplier sector was resilient to external shocks.

As such, the NAO states that Ofgem and BEIS must ensure the supply market recovers from its current state, facilitating a longer-term transition of the supplier market to one that truly works for consumers and supports the achievement of net zero.

It sets out several recommendations for BEIS and Ofgem, including that they should establish a process for considering how new interventions in the retail market, like the cap, would react in a range of scenarios; set a date by which they will review the changes needed to retail market regulation so that the supply market aligns with net zero; and review and update the SoLR process.

In addition, it sets out that Ofgem should define a set of objectives for its regulation of the retail market, reviewing and reporting on its performance at least annually; build regular review points into its current round of changes to supplier regulation, including the new financial responsibility principles; and consider whether it is able to adequately monitor compliance with its new rules around the energy market UK financial responsibility, as part of regular reviews.

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