Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Acknowledged
Ofgem’s headcount was approximately 1,400 in July 2022.
Conclusion
Ofgem’s headcount was approximately 1,400 in July 2022. This is higher than the 1,246 total staff Ofgem employed on average through 2021–22, and an increase of around 72% from the 816 total staff it employed during 2017–18.25 It had submitted a bid to HM Treasury asking for more resources to carry out its functions. It told us that this was driven by three factors, only one of which was changing its regulatory regime for the retail energy market to be more proactive, based on the approach to regulation of the financial sector. Ofgem explain that it had also asked for more resources to enable it to implement 17 C&AG’s Report, para 3.15 18 RES 0002, SSE Energy Solutions, 11 July 2022; RES 0009, EDF, 11 July 2022; RES 0007, Centrica 11 July 2022; RES 0005, E.ON, 11 July 2022; RES 0004, Octopus Energy, 11 July 2022. 19 RES 0002, SSE Energy Solutions 11 July 2022; RES 0005, E.ON, 11 July 2022 20 Q 70; RES 0004, Octopus Energy, 11 July 2022 21 Qq 65, 75 22 Qq 100–101 23 Q 32 24 Qq 32, 52 25 Q 100; Ofgem, Annual Report and Accounts 2021–22, HC 489, July 2022 and Ofgem, Annual Report and Accounts 2017–18, HC 1107, June 2018 12 Regulation of energy suppliers new government schemes, such as the Department’s boiler upgrade scheme, and to take on regulatory responsibility for new areas, such as carbon capture and storage and new nuclear power plants.26
Government Response Summary
The government acknowledges the need for resources at Ofgem, noting an additional three staff for retail compliance. However, they indicate resource allocation is complex, with some funding earmarked for specific activities.
Government Response
Acknowledged
HM Government
Acknowledged
3.1 The government agrees with the Committee’s recommendation. Target implementation date: January 2023 3.2 Ofgem has undertaken a prioritisation exercise to flex resource where possible and in November 2022 approved an additional three full time equivalent staff for Retail Compliance focusing on financial resilience. However, retail compliance is one of several priorities including the price control work, the drive to net zero and policy work following the retail failures. In addition, a proportion of the budget comes from BEIS and is funding for specific activity that cannot be diverted to other areas. 3.3 Over the last three years, Ofgem’s compliance and enforcement teams have broadened their approach to tackle emerging issues as quickly as possible and better manage licensee behaviour, including through a greater use of alternative action and Orders. In this time Ofgem has issued over 60 Orders to suppliers as part of successful action on over 80 supplier cases with penalty/redress payments of over £37.5 million, out of a broader figure of over £300 million across all regulated parties. 3.4 During 2022, Ofgem engaged suppliers in areas including financial resilience, stress testing, asset control and launched a series of market compliance reviews. These activities, and associated compliance engagements, are ongoing but have already initiated enforcement action against TruEnergy, Foxglove, UK Energy Incubator Hub, Utilita and Scottish Power. Ofgem has consulted on, and implemented, several changes to further protect consumers including modifications to licence conditions for new entrants and where suppliers reach certain milestones, updates to the financial responsibility and operational capacity principles, and additional measures for reducing potential supplier failure and better protecting consumers money. 3.5 Ofgem has continued to strengthen its compliance and enforcement capacity with 60 Full Time Equivalent staff in position as of 30 September 2022. 3.6 In terms of customer continuity plans, since June 2022 Ofgem has created a financial resilience compliance team with recruitment underway. This team has compliance, enforcement, energy and financial skill sets and are currently undertaking reviews of ‘fit and proper’, ‘asset control’ and ‘financial resilience’ resulting from financial stress testing scenario 13 monitoring. They liaise closely with Ofgem enforcement and financial monitoring teams to ensure escalated compliance and enforcement activity occurs as and when necessary. 3.7 On supplier business continuity plans (BCPs), Ofgem has already requested information related to all domestic supplier BCPs as part of a current market compliance review into customer service and complaints arrangements (due to be published early in the new year). These are currently being assessed for quality and suitability and Ofgem is planning to put in place improvement action plans where the review identifies any areas of concern. Ofgem will keep the Committee apprised of the results of this review.