In a report, the ECCC accused the regulator of not yet delivering value for energy consumers in its networks regulation and has called for an independent audit of the price controls.
ECCC chair Tim Yeo said there is “clear evidence” that network companies are making higher profits than expected and warns that price caps set by Ofgem have been “too generous and performance targets too low”.
The current system of network costs is “too complex” and market conditions should be improved in the short-term by conducting interim independent audits of price controls and increasing the notification period network companies must allow for price changes to 15 months.
Stronger corrective measures are also suggested for companies receiving incentive payments for reducing energy leakages when such reductions have not taken place.
Network costs currently making up around 23 per cent of a dual-fuel bill and Yeo has long been critical of the way such prices are regulated.
He said: “Ofgem must get its act together and scrutinise these near monopolies more effectively. Simpler charging methodologies are needed to strengthen the market’s ability to scrutinise costs and increase the pressure for greater cost-saving efficiencies.”
British Gas head of network regulation Andy Manning agrees. In a speech at a London conference last week he suggested that the fact networks are able to outperform may mean the set targets are “too easy”.
Fending off criticism, the energy regulator insisted that regulation has “delivered value for money”, pointing out that Britain’s energy network is 17 per cent cheaper in real terms than 25 years ago.
“We are in the process of implementing a number of the actions the report highlights, including introducing more competition to networks and looking to increase the notification period of network charges,” an Ofgem spokesperson said.
“Additionally, we estimate that our innovation stimulus will see companies realise around £900 million of benefits to consumers in the next eight years.”
However, Yeo said: “Barriers preventing smaller players from entering the market must be removed to drive down costs for consumers.”