The government has announced reforms at energy regulator Ofgem aimed at strengthening consumer protection.
The Department of Energy Security and Net Zero (DESNZ) said the “comprehensive review” will give Ofgem stronger powers to directly enforce consumer law, the ability to regulate “new areas of the market” and to ban bonuses from energy executives if they “break the rules”.
Essentially, the announced reforms strengthen the regulator and expand its powers over the energy market, the first “major update” to its operations since it was established in 2000, DESNZ said.
In practical terms, Ofgem will step back from its oversight of home upgrade programs (for rooftop solar, energy storage or heat pumps) to “focus on its core functions as a regulator of the economy and consumer protection.” The regulator will also improve its technical expertise and use of data, as well as reforms to its “approach to risk… allowing the regulator to make faster decisions in the interests of consumers.”
The government said the changes would enable Ofgem to “drive clean energy and economic growth” to increase innovation, investment and modernization in the UK energy system.
Tim Jarvis, interim CEO of Ofgem, said: “The UK energy system is undergoing the biggest changes in our lifetimes, and the regulator must be able to keep pace with that change. This review sets out ambitious, necessary reforms that will enable Ofgem to meet the challenges of regulating an increasingly electrified and flexible energy system and protect consumers so they can confidently participate in markets offering new products and services.”
He continued: “This review allows us to make changes at a more systemic level to ensure we deliver an energy system that works for consumers, is attractive to investors and provides a stable, reliable environment for industry participants.”
Laura Sandy CBE, chair of the Energy Network Innovation Taskforce and Green Alliance, welcomed the reforms, saying they have streamlined Ofgem’s role “to become a truly modern regulator, moving from technology-based regulation to a consumer-focused model and responsible for driving growth.”
Energy shock in the Middle East
The reforms come as British consumers face the prospect of renewed energy volatility and price increases due to the ongoing conflict in the Middle East.
Earlier this month, public data analyzed by nonprofits Campaign Collective and the End Fuel Poverty Coalition showed that Britain energy bosses had made millions of pounds in personal equity during the first month of the conflict in Iran, even as the International Energy Agency (IEA) warned it could trigger the worst energy crisis in history.
Yesterday, Energy Secretary Ed Miliband announced plans to reduce the impact of gas prices on UK electricity rates an increase in the Electricity Generator Tax (EGL), a windfall tax on renewable energy producers. It continues its push to commit Britain to a net zero tariff in the face of increased energy volatility.
Today the Office of National Statistics (ONS) said UK inflation rose to 3.3% in the year to March, mainly due to rising fuel prices following the US-Israeli war with Iran.
Ofgem is already expanding the rollout of renewable energy in Britain and reducing dependence on fossil fuels. The network queuing reform program aimed to reduce the interconnection backlog that was reportedly reached 722 GW by the end of 2024.
However, on Monday the regulator, together with DESNZ, issued a open letter in response to concerns about oversupply in the new queuing system, especially of battery energy storage systems (BESS). This followed delays in more than half of the projects in the reformed queue.
