IoD: Major questions around the governance of energy suppliers

Commenting on reports that Business Secretary Kwasi Kwarteng is considering some form of major government bailout of energy suppliers, Dr. Roger Barker said:

“Although the energy sector has experienced a substantial price shock in recent months, it is deeply concerning that this is undermining the financial viability of numerous market participants.

“The impact is likely to be felt by retail customers, and could require the deployment of substantial public funds in order to prevent market chaos.

“Many suppliers appear to have exposed themselves to a substantial mismatch between their price commitments to customers and the price at which they can access the wholesale market. Such a misjudgement represents a failure of governance, and policy-makers must review with urgency how this has come about.

“A well-governed energy supplier should be planning for differing market scenarios in their stress testing and risk management activities. Contingency plans and mitigation strategies should be robustly challenged by non-executive board members in order to ensure that enterprises are prudently managing their risks. But these governance mechanisms appear to have systemically failed across many market players.

“There is a surprising lack of resilience in the sector, which will need to be addressed by policy-makers when the current situation has stabilised.”