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A flurry of reforms in the energy sector could prevent new ideas from entering the market and improving outcomes for consumers, the boss of challenger supplier Good Energy has warned.
Chief executive Nigel Pocklington feared the watchdog was “overcompensating” following heavy criticism of the charities. Citizens Advice And Parliamentary Committees To deal with the energy crisis, which has seen the collapse of 30 suppliers in the past 18 months.
This included the collapse of the de-facto nationalization of Bulb Energy for more than a year, calculated by the Office for Budget Responsibility at £6.5bn – the biggest state bailout since RBS in 2008.
he said City AM: “There is a real risk that in response to lax regulation, we do things that return the energy supply market to an oligopoly, which is bad for innovation and bad for consumers.”
Pocklington argued that Ofgem was “trying to show that they are a tough regulator,” but in doing so “generated headlines without being properly engaged.”
This includes making it difficult for niche suppliers to provide unique offerings to customers.
In particular, the energy boss criticized Ofgem’s recent compliance report on the energy sector, where the watchdog revealed that Good Energy, along with four other companies, had “serious weaknesses” in managing vulnerable customers.
Pocklington challenged Ofgem’s ruling and criticized the regulator’s handling of reviews across the energy market.
He criticized the review process as “difficult to follow”, and felt it benefited larger firms with large compliance teams who had staff members who had experience of working at Ofgem and “understood the language” of reviews.
This means that even if the firm’s actual results for clients are “not great”, they can “say what is needed”.
He said: “We have always been very focused on results and we obviously have to improve our documentation, which these reviews say. We have never been called for a bad result.
Pocklington also felt Ofgem was “in a rush to go public”, a situation he described as “deplorable”.
He explained: “There’s a risk that Ofgem tries to show publicly that it’s a very active regulator that what you’re doing is favoring very large suppliers who have large regulatory and compliance teams and a revolving door between them and Ofgem. is.”
Utilita boss Bill Bullen also recently criticized Ofgem’s recent reviews of the market, which were also heavily criticized by the watchdog.
he said City AM Last week he feared the market was consolidating around established players, who are benefiting from Ofgem’s reforms.
It’s not the first time Good Energy has been in Ofgem’s crosshairs.
The latest gloomy report card follows an earlier review this summer where the watchdog revealed that Good Energy had “moderate to severe” weaknesses with its payment processes for customers.
Good Energy also agreed last month to refund more than £450,000 after imposing unauthorized administration charges on owners of renewable generators.
Ofgem has been contacted for comment.
Ofgem scrambles to clean up energy market
Ofgem has unveiled multiple reforms in the wake of the energy crisis, with households and businesses facing record energy bills of an average of £2,500 a year this winter – despite huge subsidies included in support packages.
These include quarterly price limits, fit and proper person rules, financial stress tests and temporary market stabilization charges to prevent firms from being penalized for hedging.
Recently, it announced capital adequacy requirements and ringfencing rules for repayment of revolving liabilities – although it stops short of meeting ringfencing requirements for consumer credit balances.
Pocklington was broadly in favor of these regulations, particularly as attention was shifting from unrealistic price competition to that driven by inadequate hedging strategies.
He said: “I think it’s perfectly legitimate for the regulator to be very strong, especially on the hedging requirements, relative to the scale of your business because what went wrong with Bulb got so big very quickly.
Pocklington favors an energy market focused on a company’s proposition such as its energy sources and efficiency as a company.
However, he stressed that this should be regulated in such a way that it “does not prevent new and innovative ideas from coming in.”
Octopus is set to take over the bulb, on course to second the Big Six with a 90 per cent share of the UK energy market.
Meanwhile, challenger suppliers are struggling again, with Saw Energy scrambling to secure £50m in funding before winter.
Good Energy is currently focusing on green energy to create a green lifestyle that embraces its customers.
The company popularized and developed the concept of feed-in-tariff, whereby consumers purchase energy from small, licensed suppliers and connect their renewable energy sources to the grid.
These customers make up about two-thirds of its 276,000 customer base.
Good Energy’s share price is being held back by the market crisis (Source: London Stock Exchange)
However, as green energy becomes more and more affordable, Good Energy now wants to support future technologies such as heat pumps and electric vehicles.
Earlier today, the FTSE AIM All-Share Company has announced it has snapped up off-the-shelf heat pump installer Igloo Works in a £1.75m deal.
It also continues to invest in Zap Map, an EV smart phone service, backing its £9m fundraising with a £1m commitment with Fleetcor earlier this year.
Commenting on the future, Pocklington said: “We see the future of Good Energy as a provider of energy services that help people green themselves. We think those are the markets that deliver growth to our shareholders and, in the long term, offer more attractive economic characteristics than the basic supply business.”
By CityAM
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