Brearley: Ofgem must evolve to adapt to changing sector

Ofgem must undergo organisational changes to adapt to the ever-evolving energy landscape, the regulator’s chief executive Jonathan Brearley has said.

In his keynote address at Utility Week’s Build Back Better forum this afternoon (21 October) Brearley outlined key change programmes the regulator has identified.

He spoke about the importance of investment in low-carbon infrastructure, the need for a flexible marketplace, the future of the retail market and data and digitalisation.

The Ofgem chief also talked about system governance, the way the regulator manages the system and institutions behind it.

He said: “As you know we do have the system operator review ongoing, we do expect to be publishing that in due course.

“But that is only part of the story, we do accept that we as a regulator may need to change. We are absolutely up for having a conversation about what a 21st century regulator in the energy sector looks like. I would like to lead us as an organisation through that transformation.”

Since taking the helm earlier this year, Brearley has commenced an organisational restructure of Ofgem’s leadership team.

Brearley said: “Ofgem itself is going to need to change and we are fully up for the conversation about what that might mean about our roles and our duties. Alongside that we are working very hard to transform ourselves as an organisation. We were designed in a world that was not moving the way the energy system is moving now so we want to become a more adaptable and responsive organisation.

“As many of you will know we have started that by moving to a much flatter, much more horizontal and less hierarchical senior structure. But there will be more changes in the way we run and operate ourselves in the future.”

In an interview with Utility Week earlier this month, Ofgem’s former chief executive Dermot Nolan stressed that the regulator needs statutory guidance on how its core objectives should reflect the net-zero journey before it assesses distribution networks’ business plans for the next five years.

Nolan said Ofgem needed clarity on whether the need for anticipatory investment in decarbonisation projects should override the principle of keeping costs down for billpayers.

Brearley also touched on the “robust debate” over the RIIO2 draft determinations in gas and transmission.

He said: “One of the things we have been asking for as a regulator is for more evidence around some of the business plans that were submitted over the summer. We have had a huge amount more evidence from the network companies.

“We are working through that in a structured way and I am confident we will end up in December with the right balance between the interests of customers, who need to be protected, the investment we need to make sure we get to net zero, and making sure there is a fair and reasonable return for shareholders.

“I believe ultimately we can make that happen.”