Source · Select Committees · Business and Trade Committee
Recommendation 57
57
Acknowledged
Paragraph: 219
The energy price crisis is putting continued strain on the remaining suppliers in the market.
Conclusion
The energy price crisis is putting continued strain on the remaining suppliers in the market. At the same time, Ofgem is proceeding with a programme of major regulatory reform with the objective to reverse its previous litany of shortcomings and shore up the financial resilience of the market. However, if its policies are poorly designed and executed, they could have the opposing effect and further destabilise the market, at additional cost to households and/or taxpayers. We remain unconvinced of Ofgem’s ability to undertake regulatory reform in a way that effectively manages the complex trade-offs or range of business models in the market. We are concerned that it will address its inability to monitor and enforce principle-based rules by implementing an overly prescriptive regulatory regime. We have outlined a wide range of actions Ofgem should take to improve its performance and we will provide greater oversight of the regulator in the future.
Government Response Summary
The government acknowledges Ofgem's efforts to improve the robustness of the energy supply market, including an independent review into supplier failures and a new Review of UK Energy Regulation, and details its own oversight of Ofgem.
Paragraph Reference:
219
Government Response
Acknowledged
HM Government
Acknowledged
Ofgem has recognised how its regulatory approach over the latest 18 months has contributed to supplier failure and the related issues within the energy supply market and is taking active efforts to ensure that the supply market is more robust going forward to ensure we don’t see a repeat of the recent issues. This includes through commissioning an independent review into the root causes of the recent supplier failures and specifically, into how regulation of the industry played a part. Additionally, on 8 September, the government announced it will consider undertaking fundamental reforms to the structure and regulation of the energy market through recommendations from a new Review of UK Energy Regulation. BEIS does not have a formal role in addressing Ofgem’s performance; Ofgem instead answers directly to Parliament for the performance of its statutory duties. However, Ofgem and BEIS provide quarterly reports to BEIS’ Performance & Risk (P&R) Committee, a delegated committee of BEIS’ Executive Committee. The P&R Committee scrutinises Ofgem’s performance and delivery of programme and policy commitments. BEIS and Ofgem also regularly engage at both a senior and working level to work towards common objectives and be alert to risks. These engagements include, but are not limited to, frequent meetings between Ofgem and the Secretary of State, and meetings between Ofgem and the Director General for Energy & Security. BEIS is currently working with Ofgem to review and update the joint BEIS-Ofgem framework document. This will be done in line with Managing Public Money guidance, and we intend to publish this in due course.