Department of Energy Security and Net Zero's call for evidence on a review of Ofgem

The IET has responded to the Department of Energy Security and Net Zero's call for evidence on a review of Ofgem. This Call for Evidence aims to explore Ofgem's future role so that it can best support an energy market characterised by innovation and high standards, providing consumers with better products and services tailored to their needs. Topics span Ofgem's mandate, powers, scope, standards, and mechanisms for redress when standards are unmet.

This Call for Evidence to review Ofgem’s future role comes at a critical moment in the development of the UK’s energy sector. The launch of the Government’s Clean Power 2030 mission presents a huge challenge for electricity network infrastructure delivery, at the same time as customer bills continue to rise and the debate around who will pay for the energy transition remains unsettled. Solving these material challenges to energy sector stakeholders is of critical importance. Ofgem will play a major role but so will Mission Control, NESO, GB Energy and DESNZ.

The IET has campaigned for whole systems thinking through the Future Power System Architecture project which has been widely adopted by NESO and others. We advise this thinking should extend into the regulatory arrangements for the energy sector. Therefore, this review of Ofgem should look across the sector and, as a priority, provide clarity as to how the Clean Power 2030 mission will be governed.

Some of the IETs key recommendations include:

• Clarification of Ofgem’s role within the energy system is necessary to ensure it works in a coordinated manner with the obligations possessed by other actors, including Great British Energy, the National Energy System Operator (NESO), and Mission Control. This should include consideration of how Ofgem's legal mandate works with the mandate of other energy stakeholders, and clarification between the duties of Ofgem, the Independent System Operator and Network Owners.
• Ofgem should embrace digitalisation and streamline its reporting and publications function to drive transparency and accountability. They could do this by leveraging AI tools such as such as automated summarisation or interactive dashboards.
• Ofgem needs to ensure that it has the appropriate number of economists and engineers, including those with skills in whole systems thinking, so that it can understand, anticipate and address emerging regulatory issues with the technical knowledge base required.
• Ofgem's regulatory remit should seek to find the appropriate balance between today's customers and future customers to deliver longer-term interests in managing net zero and climate adaptation.