Source · Select Committees · Environmental Audit Committee
Recommendation 23
23
Accepted
Paragraph: 97
Ofgem's current electricity network regulation model unresponsive to rapid energy system flux.
Conclusion
We consider that the current model of Ofgem electricity network regulation, based around lengthy multi-year business plans, risks not being responsive enough to an energy system which is in rapid flux. The present regulatory model locks in market controls over many years: in the current climate, this risks slowing down innovation and restricting network development.
Government response summary AI-generated
The government agrees with the underlying concern and outlines robust governance and regulatory arrangements for the National Energy System Operator (NESO), including Ofgem's ongoing performance monitoring, biennial reviews, oversight of remuneration, and strict criteria for board appointments, alongside a clear framework document and new independent Chair.
Summary of the government's response below — read the verbatim text to verify.
Paragraph Reference:
97
Government Response
Accepted
HM Government · verbatim extract
Accepted
Ofgem, as the independent energy regulator, is responsible for setting and reviewing electricity network price controls. The Government is working with Ofgem to ensure the price controls support our objectives. Ofgem recognises the need to ensure that decision-making processes to agree new investment projects are as agile as possible and has worked with industry to achieve this objective. Strategic investment is being enabled by allowing for investment ahead of need, considering energy forecasts beyond 2028. The ED2 and ET2 price controls include agile uncertainty mechanisms, enabling networks to anticipate and respond to changing requirements during a price control period. Re-openers are a type of RIIO uncertainty mechanism, which will enable network companies to request additional funding during the price control period if certain conditions are met.
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