Beleaguered energy regulator Ofgem faced further pressure this morning, with news that Christine Farnish, a non-executive director sitting on its supervisory board GEMA, has resigned over this month’s changes made to calculate the retail price cap.

Farnish alleges so-called the ‘backwardisation’ of costs which companies are permitted to present to the regulator favour suppliers over consumers.

At the same time as it introduced quarterly revisions of the cap , earlier this month Ofgem permitted firms to adduce only six months of high wholesale prices, in place of the previous twelve, when asking the regulator to set the cap.

Farnish and critics including charities combatting fuel poverty say the methodology leans too far towards suppliers, at the expense of home energy users.

The latter are now seeing tariffs capped by Ofgem measure rocketing from just under £2,000 a year now, a rise of 50% on last year. A further doubling to £4,266 is predicted for January.

Farnish chaired Consumer Focus, the government’s watchdog, from December 2010.  She also served as non-executive director for Ofwat the water regulator.

As reported in the Financial Times, Farnish said she’d stepped down from Ofgem “didn’t get the balance right and gave too much benefit to companies at the expense of consumers”.

“It’s a judgment call”, the FT quoted Farnish as saying. “Answers aren’t particularly palatable but you want the interests of consumers to come first”.

Ofgem defended its revised methodology. In an unprecedented energy crisis, a spokesperson said, it was having to make difficult decisions where carefully balanced trade-offs are being weighed up all the time.

“But we always prioritise consumers’ needs both in the immediate and long term”, the regulator claimed.

“The rest of the board decided a shorter recovery period for energy costs was in the best interest of consumers in the long term by reducing the very real risk of suppliers going bust” the Ofgem spokesperson added

“This would heap yet more costs on to bills and add unnecessary worry and concern at an already very difficult time.”


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