No bonus for watchdog boss who admits failing vulnerable on energy bills
Price cap could “significantly” cut bills as early as Christmas 2018.
The head of energy watchdog Ofgem has told MPs he is not getting a bonus this year, as he apologised for moving too slowly to protect vulnerable gas and electricity consumers.
Dermot Nolan was accused at a parliamentary committee hearing of a “passive” approach to his job of regulating the market, which had led to many customers paying higher bills.
The Ofgem chief executive said he “regrets” not taking swifter action to cap payments by vulnerable people on power companies’ standard variable tariffs (SVTs).
Mr Nolan told the House of Commons Business Committee a market-wide cap on bills could be in effect by Christmas if Government legislation gets through the Parliament by July.
He said the Government’s cap should “go a long way towards fixing the market” by significantly reducing bills for people on SVTs who are paying “some of the highest prices”.
But he warned it may also reduce incentives for consumers to shop around and switch supplier.
The cap is due to lapse in 2023, but Mr Nolan said it is “very likely” to be necessary to retain protections for the most vulnerable households – often elderly or disabled – who do not engage with the switching process.
Around 12 million households are believed to be still on uncapped SVTs, despite a report from the Competition and Markets Authority which warned in 2016 that they were contributing to £1.4 billion in excess profits to energy companies.
Plans for a universal price cap were announced in the Conservative manifesto last year, but after the election Theresa May passed responsibility to Ofgem, which faced criticism for coming up only with proposals to protect the most vulnerable.
Frustrated by the lack of progress from the regulator, the Prime Minister announced legislation to rein in “rip-off” bills in her speech to the Tory conference in October.
Mr Nolan told MPs: “I accept the point that we could have done better and should have done better for vulnerable customers.
“I wish we had moved earlier on putting price caps in.”
Committee chairwoman Rachel Reeves told him: “You are the person who is supposed to be delivering on this.
“Your role is not to hope that next year fewer people are paying more than they should be on SVTs, but to stop this exploitation of customers.”
Ms Reeves challenged him over bonuses which totalled £921,000 at Ofgem last year, reportedly including £15,000 for Mr Nolan himself.
He replied that bonuses were calculated according to civil service guidelines, but added: “For me, I accept the point and I can tell the chair I did not receive a bonus this year.” Ofgem later made clear that Mr Nolan had not been awarded a bonus.
Mr Nolan warned that energy companies may seek to “game the system” by taking advantage of an exemption allowing “green” deals to be priced higher than the cap.
He said Ofgem would monitor such tariffs “very, very intensively” and impose “punitive” fines if they are found not to be sufficiently environment-friendly.