British Gas has abandoned its long-standing opposition to the energy price cap and admitted that “price regulation has helped the consumer”.

Chris O’Shea, the boss of Britain’s biggest energy supplier, also blamed the smaller companies going bust for their own demise and warned that households faced a bill of hundreds of millions of pounds for the costs British Gas is incurring by taking on their customers. He said that well-run firms of any size should be able to withstand soaring wholesale gas and electricity prices and called for stronger regulation to prevent more suppliers failing in future.

O’Shea took over as chief executive of Centrica, the owner of British Gas, last year, succeeding Iain Conn who lobbied vociferously against the price cap for years. Centrica’s website still carries campaign material claiming: “The cap won’t work and will have harmful consequences for customers.”

Yet in a remarkable corporate reversal, O’Shea told The Times: “I think price regulation has helped the consumer. I think that price regulation should stay.”

O’Shea said that “the method of price regulation may need some changes” and the mechanism used to set the price cap should be reviewed. But he insisted: “I’m very comfortable with the price cap staying as we go forward. I’m not asking for it to be removed.”

The price cap for 11 million households on standard variable tariffs was introduced at the start of 2019 after Theresa May’s government concluded that it was necessary to prevent companies ripping off loyal customers who did not shop around for cheap fixed-price deals.

It forced big suppliers including British Gas to cut their standard prices and hit Centrica’s profits, prompting it to cut thousands of jobs to reduce costs. Centrica has lost 75 per cent of its value in the past five years as British Gas, which supplied 6.8 million households as of July, lost millions of customers to cut-price rivals, many of which are now going bust as wholesale prices soar.

Six companies supplying 1.5 million households have failed this month alone and Ofgem has appointed British Gas to take on the 440,000 customers of three of them. Critics suggest that Centrica has dropped its opposition to the price cap because the cap may be hastening the demise of smaller suppliers, enabling British Gas to swiftly regain market share.

The cap is updated each April and October to reflect Ofgem’s view of the costs companies face but uses historical data and assumes that companies hedge and buy energy well in advance. O’Shea confirmed that Centrica did so and made a “moderate profit” on existing standard variable tariff customers.

Some small suppliers complain that they cannot hedge as much and are now struggling because soaring wholesale costs mean that the cap is set well below the cost of buying energy today. O’Shea said that “companies that have not hedged their purchases of gas and electricity and haven’t had the right risk management techniques have been found out by an increase in prices”. He said that “regulation has to be strengthened” to ensure that companies were adequately capitalised for the risks they were taking, adding: “We have to make sure this doesn’t happen again.”

Even big companies such as British Gas cannot now buy wholesale energy cheaply enough to take on significant numbers of additional customers on standard tariffs and only charge them the price cap without incurring losses. British Gas has just taken on 350,000 customers of People’s Energy, which collapsed last week, but will claim back the additional costs it incurs by doing so from an industry-wide levy that will be paid by all households.

O’Shea said that this would include “tens of millions of pounds” for customer credit balances, as well as the extra costs of buying energy that it cannot recoup and confirmed third party estimates that this could be in the region of £200 million.

Suppliers have been in talks with the government and the regulator Ofgem over whether this process for dealing with collapsed suppliers is adequate or whether companies taking on large numbers of customers may need government-backed loans to help them.

O’Shea declined to comment on the negotiations but warned: “The process we have got has never been tested at this scale and it may not cope with the current situation.”

He denied that Centrica was doing well from the crisis, insisting “there are no winners here”, yet admitted that Centrica should see higher profits from its North Sea business Spirit Energy, which it is looking to sell. Although much of its production has been sold in advance, “with higher commodity prices if you’re selling commodity you would expect to see some benefit”.