Inquiry on energy market announced by committee of MPs

They will look at the role of Ofgem and what regulatory requirements energy suppliers must meet to be a UK energy supplier.

Other terms of reference in the inquiry include how well the energy price cap functions and how it should be used in the future.

It follows the collapse of more than 25 energy suppliers in 2021 amid an ongoing energy crisis.

Inquiry

The Committee has invited submissions to an inquiry entitled "Energy pricing and the future of the Energy Market".

They have asked energy suppliers, Ofgem, the Government and other stakeholders to submit evidence on different points including:

• Ofgem and their performance in setting regulation and supervising energy companies
• The regulatory requirements energy companies must meet
• How the energy price cap has functioned and performed and how it might perform
• How policies to encourage competition in the energy market has worked and how it might work in the future

The inquiry will also look at the future of Bulb who became the biggest casualty of the crisis when they collapsed into a Special Administrator Regime (SAR) in late November.

Some of the Committee's focus will be on how to recover public funds lost from stepping in to save Bulb and how much it costs consumers when energy suppliers collapse.

The Committee is expecting to start taking evidence in early 2022, although no dates have been set.

Energy crisis

This MP inquiry into the energy market can't force the Government or Ofgem to act on any of their findings or recommendations, but it will produce a report that looks in depth at how the UK energy market has gone so badly wrong in 2021.

Bulb might be the biggest collapse of the energy crisis with 1.6 million customers but we've also seen Avro Energy collapse with 580,000 customers while the simultaneous collapses of People's Energy and Utility Point in September affected 570,000 customers.

So far, around 4.2 million customers have been impacted by the crisis and there are warnings that more suppliers could collapse over the coming months.

The announcement of an inquiry is welcome but as we highlighted when Ofgem opened a consultation into price cap changes last month, any findings won't be published for at least a couple of months and action may take longer.

It means that customers will see bills rise significantly and more may be displaced when their energy suppliers fold before any meaningful changes to the energy market take place.

Energy price cap

The energy price cap governs the amount energy suppliers can charge customers on their standard variable tariffs (SVTs) per unit of gas and electricity.

It was set at an average bill of £1,277 in October 2021 but energy customers are being warned to prepare for a huge rise when Ofgem recalculates the cap ready for April 2022.

Wholesale energy prices have caused problems globally, and one of the areas the Business, Energy and Industrial Strategy Committee wants to examine is how the wholesale prices and additional costs of supplying energy in the UK compare with other countries in Europe.

Ultimately, the dozens of energy provider collapses in 2021 have demonstrated the UK energy market isn't working effectively for customers who are displaced or taxpayers who pick the bill when suppliers fail.

Yet the answers to questions about how we got here and what happens next in UK energy pricing could still take some time to arrive.