Energy watchdog accused of failures over consumers

Chief executive Alistair Buchanan said the energy companies were now facing a “more radical package” after they failed to meet even six “fairly basic requirements” set out by Ofgem three years ago aimed at giving electricity and gas consumers a better deal.

“We thought that the companies would step forward to deliver the improvements that we set down in 2008 – they didn’t, so now we are setting out a more radical package to ensure that consumers get the appropriate treatment from the industry,” he told MPs on the Commons Energy and Climate Change Select Committee.

Mr Buchanan’s remarks were made after Ofgem was accused by Labour MP Barry Gardiner of taking part in a “rhetorical war” with the energy companies aimed at masking the regulator’s failure to act fast enough in the interests of consumers.

“The reason why you indulged in such rhetoric is actually you allowed things to go on far too long, you allowed things to go out of hand,” he told Mr Buchanan.

“Since 2008, you had not borne down upon the companies as you should.”

The challenge came as Mr Buchanan appeared before MPs following an announcement that Ofgem is pressing ahead with a proposed shake-up of the energy industry.

Earlier this year, the regulator threatened the “big six” with a referral to the Competition Commission if they did not simplify prices and sell off between 10 per cent and 20 per cent of their electricity output to allow smaller firms to enter the market.

The energy watchdog also said it had launched an investigation into a “potentially misleading” offer by Scottish Power promoted during its last price rise.

Ofgem, which is pressing ahead with a proposed shake-up of the industry, said it will look at Scottish Power’s £459 savings claim from its “Direct October 2012” offer.

The energy supplier unveiled the offer earlier this month when it said gas tariffs will rise by an average of 19 per cent from August 1 and electricity will go up by 10 per cent.

Under the Scottish Power Direct October 2012 Offer, the company guaranteed prices would remain a minimum of one per cent per year below its standard monthly direct debit gas and electricity prices until September 30, 2012.

Ofgem stressed that an investigation being launched did not mean Scottish Power had breached its obligations.

Mr Buchanan told MPs that the 19 per cent gas price increase announced by Scottish Power had “effectively” taken consumers “by surprise” and had been one of the most talked about issues he had come across in his seven years at Ofgem.