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Ofgem board director Christine Farnish quits over energy price cap

·4-min read
<span>Photograph: Sophia Evans/The Observer</span>
Photograph: Sophia Evans/The Observer

A director at energy regulator Ofgem has resigned, accusing it of favouring businesses over consumers with a rule change that will add as much as £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 the business secretary, Kwasi Kwarteng, in early August.

Farnish said the regulator “gave too much benefit to companies at the expense of consumers”, according to a leaked internal Ofgem announcement. Across the UK’s 27m retail energy customers a £400 annual bills increase could cost households more than £10bn.

Ofgem is under pressure after being blamed by some critics for not preventing the collapse of 29 energy suppliers since mid-2021. The crisis is expected to worsen with rising global energy prices pushing the energy price cap to more than £4,200 in January, according to estimates, more than double its current level. The bill increase is expected to add to inflation, which reached 10.1% , and deepen the cost of living crisis facing the UK.

The regulator has faced repeated criticism that it is putting business interests ahead of consumers, in particular with plans to increase the updates to the price cap from twice to four times a year. Consumer rights expert Martin Lewis has previously accused it of “selling consumers down the river”.

There has been no public announcement of Farnish’s departure, although Ofgem has removed her profile from its website. Farnish was previously on the boards of water regulator Ofwat, the Association of British Travel Agents, and has been a managing director at Barclays.

It is understood she objected to a change to the methodology used to calculate the price cap, which determines the average annual cost paid by households. Under the change, energy suppliers will be able to charge customers for extra “backwardation” costs they incur when securing supplies in advance.

An internal announcement from Ofgem on Farnish’s resignation said: “Most of the board felt that the trade-off should be made in favour of a faster recovery [by businesses]. But Christine believed this gave too much benefit to companies at the expense of consumers.

“In light of this principled difference of opinion, she has offered her resignation to the secretary of state, who has accepted it.”

Ofgem told her that all but two UK energy suppliers would collapse this winter if the £400 charge was not brought in, according to a government source. Ofgem has previously argued that not allowing energy companies to charge more would cause “further and significant financial pressure on an already strained supply market”.

The row is only the latest issue facing the Ofgem chief executive, Jonathan Brearley, who has led the regulator since February 2020. He has previously acknowledged that the UK’s 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 for the market today”.

There is also discontent within Ofgem, with staff telling the Guardian that morale is low following a slew of the negative news stories about the organisation. Brearley is thought to have recently fielded questions on all-staff calls on whether the regulator is supporting consumers or suppliers.

A government source said any decisions on fiscal support related to energy bills would be for the new chancellor under a new Conservative party leader on 5 September.

Ed Miliband, the shadow climate change and net zero secretary, said Farnish’s resignation was “further proof that the government is asleep at the wheel when it comes to the energy bills crisis”.

“For 12 years the Conservatives have totally failed to regulate the energy market. In no other country have 32 energy suppliers gone bust,” he said. “Labour’s fully funded plan would fix the problems immediately and for the future. It would mean people not paying a penny more on their energy bills this winter, saving the typical household £1,000.”

The government’s business department was approached for comment.

Farnish did not respond to a request for comment.

An Ofgem spokesperson said: “Christine stepped down as a non-executive director at Ofgem after six years of service on 1 August. This followed a decision the board agreed on, but she felt she couldn’t support. She was due to stand down in January.”