The energy watchdog’s chief executive is at risk of being replaced due to a tumultuous period that has led to a decline in staff morale and an increase in complaints from suppliers, according to the incoming chair. The energy select committee has expressed concerns about the future direction of Ofgem and asked the government’s nominee for chair, Mark McAllister, if he would consider replacing current CEO Jonathan Brearley if he is not leading the watchdog appropriately. McAllister, an energy executive slated to assume the chair position next month, responded that he would indeed replace Brearley if necessary.
Ofgem has faced extensive criticism for allowing undercapitalized new entrants into the electricity and gas supply market, resulting in a series of company failures during periods of high energy prices. McAllister stated during the pre-appointment hearing that he intends to challenge Brearley on his dealings with the energy industry as well as the regulator’s internal struggles. He emphasized that as chair, his role is to encourage, challenge, and, only as a last resort, replace the executive team, with the goal of making it as effective as possible.
McAllister, who is expected to replace Martin Cave as chair in November after serving as head of the Office for Nuclear Regulation for four years, emphasized his intention to elevate Ofgem’s reputation over the next five years. He acknowledged that the regulator’s reputation may have discouraged potential candidates, with only three individuals being interviewed for the role. McAllister expressed a commitment to ensuring that Ofgem learns from the energy crisis and the subsequent criticism it faced. He acknowledged the regulator’s “naivety” in allowing financially weak suppliers to enter the market, contributing to the collapses during the crisis.
Additionally, Ofgem was heavily criticized for its failure to protect consumers as energy bills soared with record-high gas market prices. Fuel poverty campaigners argued that the energy price cap did not effectively shield households from unaffordable bills. The revelation that British Gas, the UK’s largest energy supplier, had used debt agents to install prepayment meters in vulnerable individuals’ homes further added to the regulator’s negative perception.
McAllister stressed the need for Ofgem to closely supervise the industry, particularly during the winter, to ensure significant improvements in standards. He also acknowledged the low morale within Ofgem, citing criticism and an unsuccessful internal transformation project. High staff turnover has hampered the organization’s ability to perform its duties and maintain technical expertise. McAllister expressed his determination to work with Brearley and the team to create a more effective organization.
The government has outlined plans to revamp the Ofgem board this year, aiming to appoint new directors to fill five of the eight seats, including the chair position. The search is also underway for four new non-executive directors to replace Christine Farnish, who resigned last year following a dispute over the Ofgem price cap, and Paul Grout, who departed in 2021.
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