Imbalances between regulators and networks must be resolved

Imbalances in knowledge and resources between energy networks, the government and Ofgem must be addressed in order to ensure regulation is fit for net zero, Citizens Advice has argued.

A new report by the consumer charity, Future Network Regulation, makes a series of recommendations which it believes will enable a more efficient, flexible regulatory system.

The report was compiled following research conducted by consultancy Delta-EE which interviewed a range of stakeholders earlier this year to identify issues with the current RIIO regulatory framework.

In total 16 interviews were conducted with industry representatives, end-user organisations and charities, as well as independent experts and academics.

Additionally, the work incorporated three case study reviews from alternative regulatory models. They included the Water Industry Commission for Scotland, Ofwat’s PR24 framework and New York’s Reforming the Energy Vision initiative.

Among Citizens Advice’s main concerns is the imbalances of knowledge and resources between network companies and other stakeholders, including Ofgem. It called for the government and Ofgem to launch a review to identify these asymmetries, which after processes including price controls and appeals to the Competition and Markets Authority, and then a consultation to assess how best to address them.

The charity said this work would enable decisions about network to better represent the views of stakeholders that may be currently unheard or where their views are “outweighed by the disproportionate resources that can be brought to bear by network companies”.

Citizens Advice has previously identified information asymmetry as one of the factors contributing towards energy networks generating billions of pounds of “unjustified profits” during the first set of RIIO price controls.

Elsewhere, the report called for the regulatory framework to have more flexibility to cope with a rapidly changing environment.

“Longer-term and ongoing price controls using adaptive planning could help steer the early strategic investment needed for net zero,” it explained.

Other recommendations include reforming the price control process to enable more speedy decision making and creating more transparency.

To achieve this, Citizens Advice said Ofgem must be prescriptive in the information that is required from networks in the business planning process, ensuring information is “consistent, simply presented, and will enable ready comparison across companies or sectors”.

The regulator must also ensure that only essential information is required and that this can be viewed by all stakeholders.

Former Ofgem partner and Utility Week contributor Maxine Frerk has also expressed frustration previously at the inconsistency between the figures presented in distribution network operators business plans for the ED2 price controls beginning in April next year.

Citizens Advice said: “This report builds on our research with key stakeholders who provided their perspectives on what works well in the current framework, and what needs to be done to improve shortcomings.

“While the current price control framework, known as ‘RIIO’, is largely viewed as positive, there are changes needed to make it fit for the future.

“Our recommendations, if implemented, should enable a regulatory system that is more flexible, adaptive to changing conditions, that more fully incorporates consumers’ views, and is cheaper and more efficient to run.

“Change needs to happen at pace to ensure that consumers rapidly get the services that they deserve at the right cost.”

A government spokesperson said in response to the report: “We have already set out a bold vision to upgrade Great Britain’s electricity network through the Electricity Network Framework which will help us move away from expensive fossil fuels to a cleaner energy supply, while also ensuring maximum affordability for consumers and businesses.”