Ofgem accused of lacking ambition with ‘business as usual’ forward plan

Ofgem has been accused of not being ambitious enough in its plans for the energy market, with two industry bodies claiming its latest forward work plan represents “business as usual”.

Published in December last year, Ofgem’s draft Forward Work Programme sets out the regulator’s proposed priorities in 2024/25 and beyond for its regulatory work and the environmental and social schemes that it delivers for government.

It also sets out a refreshed strategic framework for its regulatory work, clarifying the projects that Ofgem intends to carry out in the coming years.

Ofgem proposes three new strategic priorities which will form the basis of a new multi-year strategy to be published this spring:

• Shaping a retail market that works for consumers
• Enabling infrastructure for net zero
• Establishing an efficient, flexible energy system

In its response to Ofgem’s consultation, Energy UK said while “significant progress” has been achieved over the past two years, it has concerns about a lack of ambition in the document.

The trade body said: “It is not clear from the summary document that ambition of the work proposed is commensurate with the challenges and opportunities facing the sector in the medium term.

“Whilst the headings look broadly right, the document feels like a continuation of business as usual/ existing activities.”

It further explained that with National Energy System Operator (NESO) beginning operation and Ofgem’s new strategic duty for net zero, it “feels like an inflection point” in the energy transition.

This context, it added, provides the regulator with an “opportunity to really begin to grapple with strategic challenges that the industry faces, and how regulatory tools could be used to drive this change”.

“The document does not feel like it reflects this inflection point or the scale of the opportunity that it represents,” it added.

Energy UK further explained that in the retail sector, for example, there are current “unparalleled challenges” such as around consumer debt, as well as emerging challenges such as how vulnerable customers will be protected as the market moves towards half-hourly settlement.

“Whilst it is always important to continue to drive up standards, the programme feels focussed on improvement rather than how it will meet these current and new strategic challenges,” it said.

The trade body has expressed similar concerns on the supply side where it says there is a “seeming mismatch” between the incremental regulatory approach and the urgent need for the UK to compete to secure the investment required for net zero.

“The regulatory frameworks – the ease and predictability of investing in UK projects and how reliable the revenue streams are a large part of this. We would welcome a more single-minded focus on these overarching strategic challenges,” it added.

Meanwhile, the Committee on Fuel Poverty has raised concerns around Ofgem’s proposals concerning consumer vulnerability, repeating the view that the plan could be viewed as “business as usual”.

In a section dedicated to driving up standards, the regulator highlights what it is proposing around protecting vulnerable consumers. Specifically, it proposes to continue monitoring suppliers to ensure they meet their obligations; to continue to work to expand the scope of effectiveness of the Priority Services Register; and says it plans to review its Consumer Vulnerability Strategy from 2019. k

The Committee said: “We welcome Ofgem’s proposals in this area. However, we note the first two could be viewed as continuing its business-as-usual activity, and the only new initiative proposed is a ‘plan’ to review a strategy to determine what else it could do to support consumers in vulnerable situations.

“In year 5 of a 6-year Consumer Vulnerability Strategy 2019-25 we would expect Ofgem to be preparing a new strategy, having already completed a review of progress half-way through the strategy.

“But given where we are, we urge Ofgem to prioritise this review and to be ambitious in scope of what it can and should do to help vulnerable consumers. And in doing this it should explicitly consider what it can do, and what it can help government to do, for those in financial vulnerability.”

A spokesperson for Ofgem said: “We are committed to protecting both current and future consumers by driving up standards in the retail market, and shaping a more affordable, greener, and more secure energy system that is resilient to external shocks.

“We welcome all views on our forward work programme and will consider the responses carefully and respond in due course.”