I received an email from my energy supplier this morning telling me that as ofgem have raised the price cap they are putting my prices up. According to the wiki page “Its primary duty is to protect the interests of consumers, where possible by promoting competition.” Yet the increase seem counter intuitive to this.
In: Economics
A problem with regulated markets like energy is that the companies are expected to perform several functions that don’t always coincide.
Socially and politically, energy companies cannot simply abandon customers nor can they simply pass on energy price fluctuations to customers. Because of the Ukraine war, raw costs for energy rose steeply in 2022 but many retail energy companies were restricted from passing those costs to consumers. This resulted severe losses and, in several cases, bankruptcies and forced mergers.
To continue the situation would either force the UK government to nationalize the industry (as companies folded) or give out huge subsidies to keep the companies alive. Essentially OFGEM had to allow prices to increase to avoid an even bigger taxpayer liability.
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