Ofgem boss demands new powers to recoup cash when energy firms collapse
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The boss of energy regulator Ofgem has called for more powers to make sure customers rather than investors get compensated when suppliers go bust. Jonathan Brearley said shareholders of some firms “took advantage” of energy price spikes even after their companies had collapsed during the energy crisis.
Speaking to the Energy Security and Net Zero Committee of MPs on Wednesday, he said the practice “points to a fundamental problem that we have in terms of the extent of our powers”, and said ministers should give Ofgem the ability to tackle it. Energy prices rocketed in 2022 after Russia’s invasion of Ukraine, causing many people to struggle to pay their gas and electricity bills.
One of the massive frustrations for me during the crisis was seeing companies go bust, where shareholders then walked away with valuable energy hedges that grew in value over time as the crisis went on. It also prompted the collapse of more than 30 energy supply firms in less than a year, forcing millions of people to switch to new, sometimes more expensive suppliers.
But shareholders in some of the companies that went bankrupt still made money after that, Mr Brearley said. That is because they had bought power at a fixed price before their company collapsed – a process known as hedging – then made money when the value of that energy rose even further later in the crisis.
