Price cap successor a ‘key priority’ for Ofgem

Ofgem has listed creating a successor to the default tariff price cap as a key priority in its strategic narrative report published today (11 July).

The energy regulator says that by 2023 it needs to have proven itself to be an organisation “capable of delivering major changes to the energy system”.

Ofgem listed three core areas of importance within the framework:

• Enable competition and innovation which drive down prices and result in new products and services
• Protect consumers, especially the vulnerable, stamping out sharp practice and ensuring fair treatment
• Decarbonise to deliver a net-zero economy at the lowest costs to consumers

Ofgem said it would remove barriers in the regulatory framework to new business models and enable stronger market incentives to shift consumption to help manage the system and encourage innovation.

It will strike a balance between using general consumer protections and sector-specific protections in response to consumers engaging with a broader range of companies which are not regulated by Ofgem.

Ofgem concedes that the domestic energy retail market “is not working well” for many consumers, with competition causing less engaged customers to “pay for their inertia”.

It recently announced it was bringing in tougher rules for market entry, following a spate of supplier failures.

In creating a net-zero economy the regulator wants to take a whole systems approach and “break down the existing silos across the energy value chain”.

“This will facilitate more competition and create new business opportunities that benefit consumers. We will consider the environmental impacts of all our ongoing regulatory decisions. We will continue to focus on ensuring security of supply for Great Britain’s energy system. We will also update our guidance on sustainability, to better inform our decision making processes, particularly in the light of government’s ambition of net-zero emissions by 2050”, it said.

Furthermore, the board has asked the senior leadership team to develop a “more agile way of working” to avoid the inefficiencies created by a more traditional working environment and to provide a more stimulating working environment for staff.

Martin Cave, the chair of Ofgem, said: “We are witnessing exciting and rapid changes in the energy system while the way consumers interact with the energy market is changing too.

“The strategic narrative will guide stakeholders on Ofgem’s planned approach to the coming opportunities and challenges over the next four years to ensure that consumer interests remain protected today and tomorrow.

“Ofgem, working with government and stakeholders, is determined to help decarbonise energy use at the lowest cost to consumers, to unlock the benefits of competition and innovation and will ensure no consumers, especially the vulnerable, are left behind.”

In addition Ofgem will also be publishing its forward work plan for consultation each year and the strategy provides the overall context for these plans.

Ofgem says that given the pace of change in the energy industry, it expects the plans to be “revised periodically” during the 2019/23 period.