Union calls for net zero energy regulator to replace Ofgem

A “failing” Ofgem should be abolished and replaced by a new regulator with a remit to deliver an affordable, net zero energy system, the union Prospect has urged.

A new report, entitled Delivering clean power: a mission for the energy system and published today (23 May), says the existing energy regulator is “not fit for purpose” and has failed to “protect consumers from unfair practices, prevent suppliers going bust or drive sufficient investment in net zero”.

“After years of failure, a new system of regulation is desperately needed,” it adds.

According to the union, Ofgem should be replaced with a new net zero energy regulator tasked with delivering a “resilient, affordable, and decarbonised energy system”.

Besides focusing on economic regulation and consumer protection, the new regulator should have a clear role in facilitating net zero investment, the report states.

However, the union report concludes that responsibilities for strategic planning should be passed to the Future System Operator (FSO) and a new Net Zero Energy Agency.

The proposed Net Zero Energy Agency would have responsibility for coordinating a national energy strategy and should take a whole system approach, considering cross-cutting issues, such as planning, investment, and workforce.

It should also have a wider remit than electricity to look at the decarbonisation of transport, buildings, and industry.

The agency should work across departments and levels of government, advised by a board made up of businesses, trade unions, and technical experts, according to Prospect, the membership of which includes technical staff working in the energy sector.

The report says the Prime Minister’s decision to establish the Department of Energy Security and Net Zero is not enough and a new set of institutions is required to drive forward a successful energy strategy to help reduce emissions, ensure security of supply and provide access to affordable power.

The union calls for the FSO to be given sufficient resources to attract and retain the skilled talent it will rely on in order to become a centre of technical expertise for running the existing energy system and advising on future needs.

Prospect also backs the introduction of a social tariff, offering targeted discounts for low income and vulnerable households with energy bills based on affordability rather than market rates.

The new social tariff should be funded through progressive taxation, offered by all energy suppliers and designed to ensure it is received by everyone eligible.

The report also calls for the government’s review of the retail energy market, which is due to be carried out this year, to consider fundamental reform of the ownership and regulation of the sector.

And the government’s ongoing review of electricity market arrangements of the wholesale market should explicitly analyse the impact of proposed changes on consumers in order to avoid unintended consequences.

And Prospect backs the Labour Party’s proposal to establish a public energy generation company, Great British Energy.

This new company should directly invest in renewables projects, prioritising technologies currently struggling to attract private investment, like tidal power.

Sue Ferns, Prospect senior deputy general secretary, said: “We have been suffering the consequences of years of failed energy policy and a regulator asleep at the wheel: rising bills for families and businesses, jobs and investment moving overseas, and desperately needed new homes unable to be built because the government hasn’t enabled investment in our electricity network.

“President Biden’s ambitious investment in good, green jobs through the Inflation Reduction Act should have shocked the (UK) government into action, but instead they are tinkering around the edges and muttering about protectionism.

“This report sets out a blueprint for the UK to become a clean energy superpower and reap the rewards of leading the world to net zero. But unless we act now, British workers and industry risk missing out on the opportunities posed by taking on this generational challenge.”

An Ofgem spokesperson defended the regulator’s track record cracking down on unfair practices, pointing as examples to last week’s £12 million fines for suppliers on a series of licence breaches and suspension on the forced fitting of prepayment meters.

In his keynote speech at last week’s Utility Week Live conference, Ofgem chief executive Jonathan Brearley said the regulator is “open” to calls to be given a more “explicit” net zero duty.