Industry NewsOfgem will continue to function as an independent energy regulator, but its operations will receive more Government oversight, it has been announced. The results of a review into the regulation of energy has been released by the Government, underlying the role Ofgem will have going forward. There had been speculation that the Government may seek to absorb more of the industry oversight, effectively neutering Ofgem. The move will bring some consistency across the energy industry, although Ofgem has indicated it is pressing on with its controversial overhaul of the markets.
Early after it came to power, the Coalition Government had promised a review of the role of Ofgem. The results of this review largely endorse the current operations of the regulator. However, changes will be made to make the policies and actions of both Ofgem and the Department of Energy and Climate Change (DECC) clearer. The Government, through DECC, will set the overarching policy, which Ofgem will be required by statute to follow. Moreover, it will publish an annual strategy and objectives statement outlining how it will address the policy. This strategy will have to be passed by Parliament before it comes into force.
As such, while still technically independent of the Government, Ofgem will become more obliged to follow its lead. In addition, it was indicated that any new energy projects or developments will be addressed primarily by Ofgem internally. Energy and Climate Change 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, added, "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 pound of investment for Britain's energy networks is delivered in the decade ahead. Consumers too need confidence in the energy market. Our Retail Market Review will provide still more assurance that protecting their interests is Ofgem's core role."