Energy prices: Failed suppliers will add £200m to bills, says Ofgem boss

Failed energy suppliers have lost around £200m of customers' money since August, which will have to be recouped through people's bills, the head of the energy regulator has said.

Ofgem boss Jonathan Brearley told MPs this would come as millions struggle with soaring energy costs.

The typical British home is set to pay an extra £693 a year on their bills from April.

Some 28 energy companies have stopped trading in the UK since last August.

More than four million customers have seen their energy supplier fold as firms collapsed under the weight of spiralling wholesale gas prices.

Addressing MPs on the Business, Energy and Industrial Strategy Committee, Mr Brearley said customers of these firms had run up about £200m of credit balances that would need to be restored by new suppliers.

The cost of protecting these customers will be spread across energy bills, he said.

• Energy price rise includes £68 for failed firms

• Calls for windfall tax grow as BP's profits surge

• Will Russia-Ukraine tensions push up UK gas bills?

Mr Brearley said bills could climb even higher in October, when the energy price cap is next set, particularly if Russia invades Ukraine. However, he warned against making price predictions this far in advance.

"When you look at the forward prices right now, there is upward pressure still, so you may see a rise in October," he told MPs.

"But the caution I have in predicting that, is I went back and looked at what we predicted in August, and the difference between those predictions - which were that the price cap would stay roughly level - versus what we've seen, are huge."

The likes of Citizens Advice have criticised Ofgem over the collapse of energy firms, as have failed suppliers.

Citizens Advice blamed the regulator in December for a "catalogue of errors" it says left the energy market in a precarious position when gas prices were high.

In a report, it questioned why the regulator failed to act on 10 separate warnings about Avro Energy before the company failed, and why it scaled back enforcement activity.

Mr Brearley told MPs he accepted the watchdog could have been tougher on the financial regulation of energy firms.

He said a "different", "tougher" kind of regulation would be needed in the future.

"We need a retail sector that's more resilient and more able to deal with the kind of shock that we've seen," he said.

"To be clear, we accept that had we done that earlier, this would have been better for customers."

'More stability'

Rising gas prices have meant that the regulator was obliged to announce a rise in the energy price cap, which limits what companies can charge consumers in England, Scotland and Wales.

From April, a typical household will pay £1,971 a year for their gas and electricity, 54% more than they pay now.

The rise will affect 22 million households, with 4.5 million customers on prepayment meters facing an even bigger increase of £708 a year.

Mr Brearley has told the BBC that the collapse of energy firms contributed about £68 towards that increase.

Many suppliers that failed blamed the energy price cap for preventing them from charging customers the true cost of energy.

Ofgem now wants to review the price cap every three months, instead of every six months at present. It argues the change would help to bring some stability for consumers and firms in a fast-moving market.