‘It’s extremely difficult to predict the future of the gas price’, Ofgem warns – with ‘many, many factors’ outside UK’s control
The prime minister raised eyebrows when he rejected warnings of a cost-of-living crisis this winter, insisting “spikes in gas prices” – like food supply problems – will soon be over.
But Jonathan Brearley, Ofgem’s chief executive, refused to echo the prediction, telling MPs. “It’s extremely difficult to predict the future of the gas price.”
He pointed to “unprecedented changes over the last few months” – which had seen the wholesale price leap by almost 6 times over the last year – warning: “We are in unprecedented territory I’m afraid.”
There were “many, many factors” that were outside the UK’s control, such as rising international demand and supply restrictions, an emergency inquiry by the Commons business committee was told.
“It’s very, very hard to predict how long that will last,” Mr Brearley said, warning an end to the supply squeeze was “not something that we at Ofgem would rely on”.
But the chief executive played down fears of the UK running out of gas, saying: “You can’t rule anything out, but we have a resilient system that customers can rely on.”
Meanwhile, the boss of the Energy UK industry body revealed it warned the government and Ofgem that the sector was fragile at least two years ago.
Chief executive Emma Pinchbeck said she had warned that even well-run suppliers might go bust, because of fault lines in the UK energy market.
“I took this job a year ago. When I was hired, the chairman of Energy UK said that your biggest challenge is going to be the vulnerability of the retail market,” she told the committee.
“And I know that, for a year or more before that, my team had been making the case to the regulator and the government that the sector is fragile.
“There’s a short-term crisis here, which is in some ways out of our control – it’s to do with the gas prices – but it’s been exacerbated and arguably caused by our regulatory design.
Ms Pinchbeck called for regulators and politicians to stop dismissing suppliers when they say the way the market is designed is flawed.
Mr Brearley declined to put a number on how many customers are with a supplier now at risk of collapse.
“We do expect a large number of customers to be affected. We’ve already seen hundreds of thousands of customers affected, that may well go well above that,” the Ofgem chief said.
“It’s very hard for me to put a figure on it. It’s not unusual for suppliers to go out of the market. I think what is different this time is that dramatic change in the costs that those suppliers are facing.”