The former director of Ofgem who dramatically resigned her post last month has called for all households to be provided energy at a fixed cost for “basic essential use”.
Christine Farnish, who quit the energy regulator last month accusing it of favouring businesses over consumers, said households should have the right to a “universal” regulated energy price.
Writing exclusively for the Guardian, Farnish said: “A modest amount of energy could be provided universally at a regulated price, that avoided sudden price shocks, for basic essential use. The costs of this would need to be smoothed over time.
“Net costs could be funded by top slicing energy profits in upstream markets. It could either be provided by current suppliers or by others through a competitive franchising process.”
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Farnish said Ofgem, or a new dedicated body, could set the level of the basic energy allowance while a smartphone app could be used to help consumers track their energy use. She also proposed measures to boost competition in the market and suggested scrapping the standing charge on consumer bills.
Farnish said the regulator “gave too much benefit to companies at the expense of consumers” when she resigned from Ofgem last month. The regulator has been accused of contributing to the failure of 29 energy suppliers since mid-2021, and consumer rights expert Martin Lewis has accused it of “selling consumers down the river”.
Ofgem last month set the next industry price cap to come in from October at £3,549, up 80% from £1,971.
The new prime minister, Liz Truss, is expected to announce on Thursday a freeze on energy bills at £2,500, funded through government borrowing.
Farnish said that intervention was likely to be a “huge and expensive sticking plaster” and long-term reform of the market was needed.
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She said the “regressive standing charge”, which is paid by all households to cover the cost of delivering energy to a property, should be abolished, replaced by charges based on usage.
“I’m not sure the standing charge is fit for the modern world. Imagine trying to cut your energy to an affordable level and having an unavoidable, uncontrollable standing charge ticking up on your meter,” she wrote. “The greater use someone made of the network, the more they would pay, which seems pretty fair.”
She also said that costs could be taken out of the industry by streamlining regulations, allowing companies to invest in innovation.
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