Ofgem warns of ‘AI discrimination’ in energy sector

Ofgem has warned that a poor application of Artificial Intelligence (AI) in the energy sector could result in “discrimination and inequality” for certain consumers.

The regulator has published a call for input on the use of AI within the sector in which it makes several recommendations setting out how it intends to deal with both the opportunities and risks.

Ofgem explained that the Department for Science, Innovation and Technology (DSIT) has set out what regulators should do to make sure that their respective sector’s follow the UK’s AI regulatory principles in its ‘A Pro-Innovation Approach to AI Regulation’ white paper.

The energy regulator said it will be measured by the Office of AI, part of DSIT, on how it guides the energy sector to use AI responsibly, to enable innovation through good practice.

While stressing that the use of AI within the sector can help improve planning, management and real-time operation of the energy system, Ofgem warned there are also challenges and risks.

“Done well, AI has the potential to improve service to consumers and identify when unfair outcomes could occur. Done poorly, AI has the potential to exclude certain customers causing discrimination and inequality, create bias resulting in disturbances in the marketplace to the detriment of customers or result in collusive processes or reducing the stability of the marketplace,” the call for input said.

Ofgem proposes several recommendations which it intends to use within its interim AI strategy which will be published at the end of this month.

These include collaboration with the Office of AI and other relevant regulators such as the Competition and Markets Authority, the Information Commissioners Office, the Equality and Human Rights Commission and the Health and Safety Executive whose remits are economy-wide and include Great Britain’s energy sector.

It will also establish an AI Best Practice Cross Industry Forum.

Ofgem is further considering the need for additional regulatory tools, such as an AI sandbox, to provide collaborative opportunities with industry.

Additionally Ofgem will develop specific guidance for the sector, an approach which is anticipated to minimise the need for formal intervention, while ensuring the regulator has the tools to take action in a proportionate way if necessary.

Akshay Kaul, Ofgem’s director-general for infrastructure, said: “AI is central to building a smart, digital energy system at the lowest possible cost to billpayers and the public purse. Britain cannot harness AI’s huge potential for net zero, however, without a clear framework to protect consumers if it is misused or used inappropriately.

“We want households and businesses to get the maximum benefit from AI’s many applications in energy, while protecting consumers from harm with targeted and proportionate regulation.”

The growth in AI has led to concerns about potential negative impacts, not just on the utilities sector, but also in wider society.

Last month a coalition of green groups warned that the growth of AI will lead to an exponential increase in energy and water usage and risks accelerating climate misinformation.

The Climate Action Against Disinformation coalition’s report on AI warned that “without immediate efforts to integrate climate and environmental justice into AI policy and incorporate input from frontline communities, AI will only exacerbate environmental injustice”.

Meanwhile earlier this year the chief executive of Octopus Energy was impersonated by fraudsters using AI technology to mimic his voice in an attempt to scam the business out of hundreds of thousands of euros.

Greg Jackson described the impersonation, which took place in a voice note sent on WhatsApp, as “eerily impressive”.