Source · Select Committees · Environmental Audit Committee
Recommendation 45
45
Acknowledged
Paragraph: 160
Optimal governance structure for distributed energy system and local authority engagement remains unclear
Conclusion
The electrification of the economy will lead to a more distributed energy system and will require local government engagement. While some efforts are underway to understand the potential for governance reform between national policy making and local policy making, the optimal governance structure involving national government, regulator, FSO and local authorities is currently unclear.
Government Response Summary
The government agrees on the importance of appropriate governance and regulatory arrangements for NESO, detailing robust systems, Ofgem's oversight, strict board criteria, and a framework document outlining roles. These arrangements will be continually monitored.
Paragraph Reference:
160
Government Response
Acknowledged
HM Government
Acknowledged
The Government agrees with this recommendation and is committed to ensuring appropriate governance and regulatory arrangements to ensure that NESO delivers the benefits expected to the GB energy system. NESO’s licenses include obligations to implement and maintain robust systems, processes, and governance arrangements to uphold impartiality. Ofgem will be delivering effective regulation of NESO and ensuring that NESO delivers for the GB energy system. Ofgem will undertake ongoing monitoring of NESO’s performance as well as biennial holistic performance reviews with a panel of industry stakeholders. Ofgem is also planning to apply appropriate oversight of the policy for senior staff remuneration, and, at the board level, there will be strict criteria on non-executive director appointments, with at least half of NESO’s non-executive directors meeting the standard of ‘Sufficiently Independent Directors’ under licence. The Government has put in robust governance arrangements, including a clear framework document outlining the roles and responsibilities of the parties involved in the relationship. A new, independent Chair, Dr Paul Golby, has been appointed to lead NESO’s Board and UK Government Investments (UKGI) have been commissioned as the Secretary of State’s Shareholder Representative, a role which includes providing a Shareholder Representative Non-Executive Director to NESO’s Board. These arrangements will be continually monitored and, if appropriate, revised to ensure they remain fit for purpose.