The next decade could see hundreds and even thousands of energy suppliers enter the energy supply market, Dermot Nolan has predicted.
Responding to questions at a conference on energy market priorities, organised by Westminster Forum in London yesterday, the Ofgem chief executive said that the number of energy suppliers would not remain fixed.
He said: “I suspect there won’t be 70 entrants in five to ten years. We may have a shake-out in the industry and a reduction in the number of suppliers.
“If there is more radical change we may have hundreds if not thousands but maybe not with the same formal supply licence structure around them.”
Nolan also said that the objectives set out for Ofgem in the government’s energy price legislation are ‘difficult to achieve but not ‘inherently impossible’.
He denied that the four objectives, which include promoting competition while capping the amount suppliers can charge for standard variable tariffs, are ‘contradictory’.
He said “I believe they are clearly difficult to achieve. I don’t think it’s inherently impossible. It is doable and we will do our best.”
And the Ofgem chief executive warned electricity companies that they faced a “rude awakening” if they tried to hike tariffs in the run up to the price cap’s introduction.
He said: “If a company is choosing to increase its price in an unreasonable manner at this point, they will get a rude awakening when they face a price cap.
“Regardless of what prices are, we will assess as much data and regulatory judgement as possible to make what we think is an accurate decision on what a price cap should be.”
Nolan also said that Ofgem has discussed potential overlaps in its regulatory framework with Ofcom if telecommunications companies branch out into energy supply.
He expressed doubt that the existing supply licence regime would be fit for purpose in this scenario.
He said: “It’s hard to imagine the current supply licence working well if a company was in a multi-service framework.”
And Nolan said that any energy supplier should have obligations to safeguard vulnerable customers.