Background on plans for Ofgem as announced in today’s budget.
From New Power, January 2016
HM Treasury has signalled a shake-up among the UK’s independent regulators, with energy leading the way.
The news came in a policy document titled “a better deal for families and firms” that aims to increase consumer power and competition in a range of industries. The Treasury wants the regulators’ functions slimmed and it wants them to share services to reduce costs.
It highlighted the “core function” of economic regulators as protecting the interest of consumers “in price controls that make sure that network monopolies set prices fairly and are run efficiently” and promoting competition “wherever possible”. It says that focus has been lost, as regulators’ functions have grown.
The government now plans to hold “star chamber” sessions to challenge “whether the functions of the economic regulators could be slimmed down to enable a greater focus on their core functions, how they can reduce unnecessary red tape and how they can be as lean as possible in their operations”. The investigation will report, alongside an initial assessment of the energy delivery landscape, by Budget 2016. At the same time, it has promised stronger enforcement powers under consumer protection legislation.
Meanwhile, the UK Regulators Network (UKRN) has agreed to consider how to streamline activities, such as sharing expertise and specialist skills in policy areas such as price controls, support functions, services and facilities. The UKRN has promised it will publish firm plans in spring 2016 and make changes by April 2017.
In the policy document, the Treasury said: “Regulatory frameworks need to be fit for purpose both at the UK and the EU level; unnecessary regulations and enforcement practices that cost businesses time and money need to be stripped back or removed; and where regulation does exist, it should help rather than hinder business.”
Focus on switching energy and water The Treasury says liberalisation and regulatory reforms in electricity, gas and water “are thought to have driven productivity growth of over 10% a year in these sectors across the 1990s”. It promised more action “over the course of this Parliament” to promote entry into the sector, competition and switching. Among water industry reforms, it plans to extend water competition to domestic customers. Under current plans, business customers will be able to switch suppliers from 2017; now the Treasury wants the domestic sector to “begin the transition” to a competitive market – raising the possibility of multi-utility supply deals – during this parliament.
New Power Report subscribers receive our monthly report and have access to our database of UK power projects. Not a subscriber? Click here for details and to sign up to our free e-newsletter, which will keep you in touch with our public site only.