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We welcome the initiative shown by Ofgem and set out in the Open Letter. The energy system is going through transformational changes, and the current governance and regulation arrangements include elements that will inhibit rather than enable the timely developments needed to deliver an affordable, resilient and net zero energy system that supports wider societal goals and operates in the interests of customers.

Future governance and regulation need to place the physics first for an energy system that is changing fast, and then find a balance between policy, market design, economic regulation, commercial contracting, and agnostic technology decisions, keeping focused on societal needs rather than the needs of the energy system.

We recognise that whole energy system regulation is outside of Ofgem’s current remit and we therefore strongly encourage Ofgem to work with other parties and government to decide whether legislative change is required to meet future challenges.

  • A major shift in regulatory methodologies is needed to address the transformative impacts of decarbonisation
  • The definition of the problem to be solved should be revisited, as a framing in terms of network price control is overly restrictive
  • The regulatory framework should be developed to include more than economics, and in particular to embody a mechanism for holistic whole-system oversight (broadly a system architect function as proposed in the Future System Operator role), subject to ongoing development.1
  • Previous work from the Future Power Systems Architecture programme should be reconsidered as a source of insight and ideas for regulatory reforms.
  • New approaches must commence during RIIO-2 to meet the pace and scale of change needed.