Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
We are concerned that the Department and Ofgem do not yet have a clear vision...
Recommendation
We are concerned that the Department and Ofgem do not yet have a clear vision of how the energy retail market will work in the best interests of customers during the transition to net zero. The UK is seeking to transform its energy generation system away from gas, towards domestic and renewable sources of energy. The Department is looking at the appropriate market arrangements for electricity in the future as the UK transitions to net zero. New forms of regulation could also be required to enable suppliers to offer innovative products and services that support the achievement of net zero, such as by encouraging households to consume electricity at times of lower demand. The Department is revisiting its Energy Retail Market Strategy to take account of the lessons from recent months, and aims to publish a revised strategy once the market has stabilised. We note the challenge that will be involved in designing and regulating the energy system during the transition to net zero. But it will nonetheless be essential that the Department and Ofgem seek an appropriate balance between measures to control cost, improve resilience and encourage innovation in the interests of consumers. Recommendation: The Department and Ofgem should, within six months, write to us to outline how they will, on an ongoing basis, ensure that they put the short and long-term interest of customers at the heart of their thinking around the transition to net zero, and how they will manage any trade-offs. 8 Regulation of energy suppliers 1 Ofgem’s regulation of the energy supplier market
Government Response Summary
The government will work with consumer groups and industry from April 2024 to consider the best approach to consumer protection, including different forms of targeted discounts, as part of wider retail market reforms. Ofgem has developed a consumer interest framework (CIF) which is currently undergoing user research.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. consumer groups and industry to consider the best approach to consumer protection in the energy market from April 2024. A key principle will be to ensure that consumer protection enables the energy market to deliver energy security and net zero at least cost, while ensuring a fair deal for consumers. There are many potential models for consumer protection, including different forms of targeted discounts, which the government will consider. Government will undertake this work as part of wider retail market reforms focused on ensuring the energy market is resilient and investable over the long-term, and that it supports wider system transformation. Ofgem has developed a consumer interest framework (CIF) as a basis for any future policy development. The CIF has four main objectives relating to fair prices, quality and standards, low-cost transition, and resilience. The framework is already embedded in Ofgem’s decision making processes and enables the regulator to identify key policy trade-offs and ensure policies are designed to meet the best interests of consumers. The framework is being consulted on as part of the Ofgem’s forward work plan and is currently undergoing user research to confirm that the CIF resonates with consumers and is fit for purpose.