Is Ofgem “failing consumers”?

Five questions answered on MPs criticism of Ofgem.

A group of MPs have come forward and said energy regulator Ofgem is “failing consumers”. We answer five questions on the MPs’ problem with Ofgem.

What exactly has Ofgem been criticised for and by whom?

 The Energy and Climate Change Committee (ECCC) has written a report saying that the watchdog was "failing consumers by not taking all possible steps to improve openness".

They added that greater transparency over the profits made by the big six energy (E.On, SSE, British Gas, Npower, EDF and Scottish Power) companies is needed.

"Greater transparency is urgently needed to reassure consumers that high energy prices are not fuelling excessive profits," the committee said.
Adding that Ofgem had not fully implemented the recommendations of the accountants it commissioned to improve how energy companies report their profits.

What have Ofgem said?

Ofgem has responded by saying it made companies produce yearly financial statements, which they had then been reviewed by accountants.

"Ofgem has made energy companies produce yearly financial statements, which have been reviewed twice by independent accountants and found to be fit for purpose," Ofgem's senior partner for markets, Rachel Fletcher, told the BBC.

However, Ofgem did admit that energy companies have been poor when it comes to communicating with customers.

So, what’s the problem with this?

The committee say forensic accountants are needed to properly understand these accounts and work out the correct profit, because the companies have different divisions to deal with different functions of their business and these often buy and sell services and energy from each other. This makes it difficult to determine how much profit is actually being made.

"Ofgem needs to use its teeth a bit more and force the energy companies to do everything they can to prove that they are squeaky clean when it comes to making and reporting their profits," said committee member John Robertson.

What have the independent experts said?

"We want the government to introduce simple energy pricing and a clear ring-fence between generation and supply businesses, so consumers can see exactly what they're paying for and be more confident that there is effective competition in the energy market," Which? executive director Richard Lloyd told the BBC.  

Angela Knight, the chief executive of Energy UK, a body which represents energy companies, said she thinks companies have come a long way on transparency.

"Energy companies all publish annual accounts and, in addition, both the generation and supply parts of the business provide Ofgem with all the information about revenues, costs and profits for which the regulator asks," she told the BBC.

What else did the committee say?

They also reprimanded the government for not helping poorer families with their energy bills more. Adding that using levies on fuel bills to raise funds for social and environmental programmes may end up hitting those on low incomes.

Ofgem has been criticised. Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

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Lord Sainsbury pulls funding from Progress and other political causes

The longstanding Labour donor will no longer fund party political causes. 

Centrist Labour MPs face a funding gap for their ideas after the longstanding Labour donor Lord Sainsbury announced he will stop financing party political causes.

Sainsbury, who served as a New Labour minister and also donated to the Liberal Democrats, is instead concentrating on charitable causes. 

Lord Sainsbury funded the centrist organisation Progress, dubbed the “original Blairite pressure group”, which was founded in mid Nineties and provided the intellectual underpinnings of New Labour.

The former supermarket boss is understood to still fund Policy Network, an international thinktank headed by New Labour veteran Peter Mandelson.

He has also funded the Remain campaign group Britain Stronger in Europe. The latter reinvented itself as Open Britain after the Leave vote, and has campaigned for a softer Brexit. Its supporters include former Lib Dem leader Nick Clegg and Labour's Chuka Umunna, and it now relies on grassroots funding.

Sainsbury said he wished to “hand the baton on to a new generation of donors” who supported progressive politics. 

Progress director Richard Angell said: “Progress is extremely grateful to Lord Sainsbury for the funding he has provided for over two decades. We always knew it would not last forever.”

The organisation has raised a third of its funding target from other donors, but is now appealing for financial support from Labour supporters. Its aims include “stopping a hard-left take over” of the Labour party and “renewing the ideas of the centre-left”. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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