UK households face another increase in energy bills in October if the tension between Russia and the Ukraine escalates into a conflict, energy regulator Ofgem warns.
The chief executive of the energy regulator, Jonathan Brearley, told the Business, Energy and Industrial Strategy (BEIS) committee that although the UK only gets around 5% of its gas supply from Moscow, an overall decrease of Russian supply to Europe meant tougher competition among UK suppliers to secure other European providers.
“If Russia invades Ukraine, that would drive high gas prices and ultimately feed through to customers,” Brearley told MPs.
Families are already under pressure as their energy bills are set to rise £693 to a typical £1,971 a year.
Ofgem announced last week that the price cap protecting 22 million households would rise by 54% from April 1 due to high gas and oil prices.
The energy regulator also admitted to its weak financial oversight of the electricity and gas retail market as 29 energy suppliers went bust last year.
“We accept that had we done that earlier [introduced a tougher financial oversight] it would have been better for customers,” Brearley said.
He added that financial regulation "needs to be tougher”.
"We need a retail sector that's more resilient and more able to deal with financial shocks,” the Ofgem CEO said.
"To be clear, chair, we accept that, had we done that sooner this would have been better for customers.”
Last week’s price cap announcement included £2.45 on the energy bills to cover £54m of lost consumer credit. But the final bill will be higher.
Around four million people have been affected by the collapse of those 29 suppliers.
The Ofgem CEO revealed that around £200m of customer credit could have vanished with the failed suppliers.
He added that a proposal to make suppliers return unspent credit balances was being implemented but had not yet been finalised.
Ofgem has been widely criticised for being slow to respond to warning that many newer entrants had weak balance sheets or were using customer deposits to fund their business.
Brearley said the energy regulator would set out new rules next month to ringfence customer deposits.
Market prices indicate that the cost of gas will remain high until the end of next year, with investment bank Goldman Sachs forecasting that prices will stay high until 2025.
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