Ofgem – Not Delivering on its Mandate.

Ofgem – Not Delivering on its Mandate.

The Energy and Climate Change Select Committee reported last week that greater than expected profits reported by network companies are a concern and indicate that the new regulatory framework introduced by Ofgem has not been effective.

“The costs charged by the companies that have a near monopoly over the UK’s gas and electricity networks are often overlooked when energy bills are discussed. But network costs are one of the main reasons dual fuel bills have risen in recent years.

Ofgem has created a new regulatory framework designed to ensure that network costs are competitive and that profits aren’t excessive, but there is clear evidence that the companies are making higher profits than expected.

Ofgem’s Chief Executive told us that we would have to wait eight years to see whether value for money was being delivered for bill payers. This is too long for hard pressed consumers to wait.”

Whilst the committee found that the new regime is an improvement there is still room for further development of the regulations. Overly generous terms and low targets contributed to this opinion.

Some of the changes proposed are;

  • Energy innovation incentives.
  • More ways to connect smaller power producers to the grid.
  • Simplified charging methodologies to increase competition in the marketplace.
  • Implement the new RIIO charging framework to pressure network operators to limit costs.
  • Simplification of codes with regional differences removed to allow more effective cost comparison.

Tim Yeo MP concluded: “Ofgem must get its act together and scrutinise these near monopolies more effectively. Simpler charging methodologies are needed to strengthen the market’s ability to scrutinise costs and increase the pressure for greater cost-saving efficiencies. Barriers preventing smaller players from entering the market must be removed to drive down costs for consumers.”

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