Ofgem reviewing approach to environmental issues

Ofgem is carrying out a “ground up” review of how it tackles environmental sustainability issues, its chairman Martin Cave revealed at last week’s Utility Week Energy Summit.

With the government formally committing to adopt the statutory target that the UK should lower greenhouse gas emissions to net zero by 2050, the role of the regulator in facilitating this transition has come under growing scrutiny.

While Ofgem has statutory duties to protect current consumers, it has no equivalent obligations surrounding environmental sustainability, which critics say results in such issues tending to be downgraded when the regulator is shaping policy or making decisions.

Cave told delegates the regulator is carrying out a “ground up” review of how it addresses sustainability issues in the light of last week’s net-zero announcement.

He said: “We are reviewing what tools available to us and various changes in how we assess proposals. We’re ruling nothing out and we hope over next the six or nine months to be able to be more explicit about what changes we make in relation to sustainability.”

Earlier in his speech, Cave said Ofgem will take a “more active role” in building up Great Britain’s low-carbon energy system.

He said: “Ofgem’s role in assessing the trade-off between current and future consumers’ interests – between cheaper prices now and more sustainability – will come into greater prominence.”

This would include ensuring that individual decisions on price controls, network charging and retail arrangements support the efficient rollout out of new sustainable technologies, such as electric cars and low-carbon heating.

Environmental impacts will be factored into all of Ofgem’s ongoing significant regulatory decisions, and as a first step, Ofgem will review the guidance given to its teams to ensure that environmental impacts are robustly assessed.

When responding to questions, Cave also signalled that there has been progress on enabling utilities from different sectors to share data in order to identify vulnerable customers.

He said: “There are very positive signs that energy and water companies, subject to various legislative restrictions, can share some of their data in order to ensure so that a customer recognised as vulnerable in energy may also be recognised as having similar vulnerabilities as water is concerned.”

Cave added that there had also been “some progress” in the financial services.

He said he had been “very impressed” since he had joined with the “really quite extraordinary things” that both distribution and supply companies are doing for vulnerable customers, such as supplying backup generators to households who rely on electricity supplies for life-saving equipment.

He said that the regulator and industry “can’t solve” the problems of poverty on their own but could do things better.