NAO: Ofgem lags behind Ofwat on climate change

Ofgem is among the key regulators namechecked by Parliament’s spending watchdog for not yet adopting climate change resilience standards.

A new report from the National Audit Office (NAO) into cross-government efforts to boost resilience to extreme weather events says this requires a “whole of society” approach.

But the government has yet to set out the respective roles that it, local councils, the public, companies and charities will play on promoting greater resilience to climate change.

The report states that while the energy sector has standards on recovering power after extreme weather and flood resilience, these mostly do not set a “measurable” level for resilience against climate change.

It says regulation can play an important role in helping to manage risks surrounding climate resilience but the government’s use of such tools is currently limited.

Most infrastructure regulators do not have specific duties regarding climate resilience, including Ofgem and Ofcom.

The government has committed to new climate resilience standards being in place by 2030, which energy network operators expect to implement by 2028.

The NAO report warns that if these resilience standards are not developed until 2030, regulatory cycles will be missed, “pushing back the opportunity for investment to meet those standards” into the following decade.

It points to a calculation by the National Infrastructure Commission that if the government misses its 2030 deadline, around £400 billion of future infrastructure investment may not be fully optimised for resilience.

However Ofwat is the exception to lack of progress on developing climate resilience standards, says the NAO, pointing to the regulator’s duties to secure the long-term resilience of water supply and wastewater systems against climate change, which use a range of regulatory tools that include the price review process.

Responding to the report, Public Accounts Committee chair Dame Meg Hillier, said: “Extreme weather events can have devastating consequences for individuals, communities and businesses. They are becoming more frequent and more severe. 8 of the 89 risks included in the government’s National Risk Register are extreme weather events.

“Today’s NAO report says that government currently has no well-defined vision for what a resilient, well-adapted UK looks like. Without this it cannot make informed decisions about short and long-term priorities, investment and funding allocations or evaluate how public funds are being spent. Government needs to do more to prepare for extreme weather. It must place emphasis on prevention and preparedness and make long-term investments to protect people and businesses.”