Source · National Audit Office

Electricity networks

This report examines how effectively Ofgem has used electricity network price controls to protect consumers and achieve government’s environmental goals.

Published: 30 Jan 2020 Recommendations: 7 Type: Value for Money NAO confirmed: 7 Department: Department for Business, Energy & Industrial Strategy

Dept: Department for Business, Energy & Industrial StrategyUnknown (355) Topics: Business and industryCommercial and regulationEnergy and environmentEnvironmental sustainabilityRegulation nao.org.uk →

Recommendations

7 items

7 accepted 7 implemented

Recommendation 1

Addressee: Ofgem · Source location: Page 11, paragraph 22, point a

To ensure the interests of consumers are protected, Ofgem should:
a) do more to demonstrate that regulation is working for consumers, by developing and publishing summary indicators of the overall value for money of networks over time and across price control periods, and improving the quality of the underlying official statistics with the Office for National Statistics;

Response position: Accepted

Delivery: Implemented · Q1 2023-24 · Confirmed by NAO

Recommendation 2

Addressee: Ofgem · Source location: Page 11, paragraph 22, point b

b) improve the evidence base on the empirical impact of regulatory decisions on investor confidence and cost of capital, and use this evidence to inform major decisions in future;

Response position: Accepted

Delivery: Implemented · Q3 2022-23 · Confirmed by NAO

Recommendation 3

Addressee: Ofgem · Source location: Page 11, paragraph 22, point c

c) assess the extent to which cost targets set in RIIO-1 were too generous in the light of likely outturn expenditure, and use this information to inform its approach to assessing individual network company business plans for RIIO-2; and

Response position: Accepted

Delivery: Implemented · Q3 2022-23 · Confirmed by NAO

Recommendation 4

Addressee: Ofgem · Source location: Page 11, paragraph 22, point d

d) ensure network companies make it clear to the public how much tax they pay; how executives are rewarded and how this links to quality of service for customers; and how dividend policies ensure companies remain sustainable.

Response position: Accepted

Delivery: Implemented · Q1 2023-24 · Confirmed by NAO

Recommendation 5

Addressee: Department for Energy Security and Net Zero · Source location: Page 11, paragraph 23, point e

BEIS, working with the Department for Transport, should:
e) work with Ofgem to obtain as much clarity as possible on the implications of heat and transport decarbonisation for future network requirements, in advance of Ofgem making significant decisions on how distribution networks will be regulated in RIIO-2.

Response position: Accepted

Delivery: Implemented · Q3 2022-23 · Confirmed by NAO

Recommendation 6

Addressee: Department for Energy Security and Net Zero · Source location: Page 11, paragraph 24, point f

BEIS should:
f) as part of its 2020 review on industry governance, investigate the potential benefits of more strategic coordination in the energy system; and

Response position: Accepted

Delivery: Implemented · Q3 2021-22 · Confirmed by NAO

Recommendation 7

Addressee: Department for Energy Security and Net Zero · Source location: Page 11, paragraph 24, point g

g) bring forward further heat decarbonisation policies that ensure the achievement of carbon emissions targets in the 2020s.

Response position: Accepted

Delivery: Implemented · Confirmed by NAO