Recommendation 4

Ofgem risks neglecting the importance of consumer engagement and behaviour change by focusing on penalising suppliers for missing targets. Energy suppliers have binding targets to install smart meters, which should be enforced by Ofgem, the energy regulator. However, energy consumers are not required to accept an offer of having smart meters installed and only one large supplier hit both its 2022 gas and electricity smart meter installation targets. Ofgem is in discussions with suppliers that did not meet their targets, and has previously used its enforcement powers to require an energy supplier to contribute more than £1m to a “redress fund”. It told us it is now considering more severe financial penalties than this. The Department and Ofgem are also in the process of reforming the energy retail market, to increase its resilience whilst enabling innovation that helps support achieving net zero. This may require Ofgem to adapt its regulatory approach, moving beyond merely considering performance against targets, to take account of suppliers’ investment in the innovation and consumer engagement that encourages consumer behaviour change in line with net zero. Recommendation 4: Ofgem should consider how its approach to regulating suppliers, on both the rollout and in relation to net zero more widely, takes account of the need for suppliers to engage their customers to promote behaviour change. Update on the rollout of smart meters 7