Ofgem director Christine Farnish resigns over energy price caps | Ofgem
A director of energy regulator Ofgem has resigned, accusing it of favoring business over consumers with a rule change that will add up to £400 to the average UK household energy bill.
Christine Farnish, a non-executive member of the Gas and Electricity Markets Authority (GEMA), Ofgem’s board, tendered her resignation to Business Secretary Kwasi Kwarteng in early August.
Farnish said the regulator “gave companies too much of a hand at the expense of consumers”, according to a leaked internal announcement from Ofgem. Of the UK’s 27 million retail energy consumers, a £400 rise in annual bills could cost households more than £10 billion.
Ofgem is under pressure after being accused by some critics of failing to prevent the collapse of 29 energy suppliers since mid-2021. The crisis is set to deepen with rising global energy prices pushing the energy price ceiling to over £4,200 in January, estimated to be more than double its current level. The rising bill is expected to worsen inflation, which has hit 10.1%, and deepen the cost of living crisis facing the UK.
The regulator has faced repeated criticism that it puts commercial interests ahead of consumers, particularly with plans to increase price cap updates from two to four times a year. Consumer rights expert Martin Lewis has previously accused it of “selling consumers downstream”.
There was no public announcement of Farnish’s departure, although Ofgem removed his profile from its website. Farnish was previously on the boards of water regulator Ofwat, the Association of British Travel Agents, and was chief executive of Barclays.
It is understood that she opposed a change in the methodology used to calculate the ceiling price, which determines the average annual cost paid by households. As part of the change, energy providers will be able to charge customers for the additional “offset” costs they incur when securing supplies in advance.
An internal Ofgem announcement on Farnish’s resignation said: ‘Most board members felt the compromise should be made in favor of a faster recovery [by businesses]. But Christine thought it benefited businesses too much at the expense of consumers.
“In light of this principled difference of opinion, she tendered her resignation to the Secretary of State, who accepted it.
Ofgem told him that all but two of Britain’s energy providers would collapse this winter if the £400 charge was not applied, according to a government source. Ofgem has previously argued that not allowing energy companies to charge more would cause ‘additional and significant financial pressure on an already tight supply market’.
The row is just the latest issue facing Ofgem chief executive Jonathan Brearley, who has led the regulator since February 2020. He has previously acknowledged that the UK retail energy industry, overseen by Ofgem, was “not resilient enough”, and this month he said the energy price cap is “clearly not fit for purpose in the current market”.
There is also discontent within Ofgem, with staff telling the Guardian that morale is low following a slew of negative news about the organisation. Brearley is believed to have recently fielded questions about calls from all staff about whether the regulator is supporting consumers or suppliers.
A government source said any decision on tax support linked to energy bills would be up to the new Chancellor under a new leader of the Conservative Party on September 5.
The Government Affairs Department has been approached for comment.
Farnish did not respond to a request for comment.
A spokeswoman for Ofgem said: “Christine resigned as non-executive director of Ofgem after six years of service on August 1. This followed a decision which the board had been settling against. OK, but she felt she couldn’t support it. She had to retire in January.