Ofgem ‘insufficient’ for changing energy markets

A Government review of energy market regulator Ofgem found its current 'broadly scoped duties and weak guidance' were insufficient for the transforming energy sector.

The Department for Energy and Climate change (DECC) published the conclusions of two reviews today (May 19) aimed at supporting the delivery of power in an environmentally sensitive way.

The Ofgem Review looks at how the regulator works and will work in the future, while DECC’s Delivery
Review aims to increase accountability and help maek the department ‘value for money’.

While the reviews broadly back the regulator, they also raise concerns over energy supply security and climate change mitigation not being served by Ofgem in its current form.

The reviews also call on Ofgem’s strategy, decision making and operations to be made more ‘transparent.

A call also recently made by the ‘Big Six’ who denied Ofgem claims of price fixing and also questioned the methods used by the regulators to come to that conclusion.

But while the review states Ofgem should continue to regulate ‘independently’ of Government, it also promises a more supportive role from the Government.

It pledges the Government will communicate ‘more clearly’ the respective roles of it and Ofgem, including clear strategic goals set out in a new statutory strategy and policy statement.

And, Ofgem will set out annually how it plans to deliver its contribution to the goals and how it will monitor progress, providing greater transparency and accountability to the public.

The Delivery Review outlines a number of measures to help ensure DECC is able to respond to the future delivery challenge.

The Ofgem Review also proposes new legislation for government to set high-level strategic goals that the energy regulator will play a part in meeting.

Energy secretary, Chris Huhne, said: “A strong, independent regulator will be crucial to building the secure, affordable, low-carbon energy we need.

“Long-term certainty is vital too. We are proposing to set clear goals which Ofgem must play its part in meeting, so that industry and consumers know the rules of the game.”

Ofgem’s chairman, Lord Mogg, said: “The emphasis DECC’s review places on the value of a strong, independent regulator is welcome.

“It underlines how important to investors a stable and predictable regulatory framework is to ensure that the £30 billion of investment for Britain’s energy networks is delivered in the decade ahead.”

Reacting to the conclusions on the Ofgem review Anaerobic Digestion and Biogas Association (ADBA) chief executive, Charlotte Morton, said: “We are also pleased that DECC has recognised that Ofgem’s ‘broadly scoped duties and weak guidance’ are insufficient for the forthcoming changes in energy markets – and that Government will ‘communicate more clearly its policy goals for the gas and electricity markets’.

“This should include ensuring Ofgem is working with the gas and electricity grid operators to make it easier, cheaper and faster for renewable energy projects to connect to the grids.”

Luke Walsh

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