Future regulation and delivery within the energy sector
Friday 10th June 2011
On 19 May 2011 the Department of Energy and Climate Change ("DECC") published the conclusions of the Ofgem Review and the Delivery Review, the terms of which were set out in the Annual Energy Statement in July 2010. The aim of these reviews was to assist the UK's energy and climate change objectives by strengthening regulation of the gas and electricity markets and improving delivery by DECC.
Ofgem Review
The Ofgem Review concentrated on the role of Ofgem in regulating the gas and electricity markets. The Government intends to strengthen the regulation of these markets but emphasised that it is committed to Ofgem as the independent regulator.
Three main issues arose from the review:
- Regulatory certainty - the Government proposes to more clearly separate its role of setting policy direction and making high level strategic decisions from Ofgem's role of developing and applying regulatory policy;
- Regulatory consistency - a Policy and Strategy Statement (to be established by legislation) will introduce a strategic policy framework for the energy sector. This framework will define the high-level strategic goals that Ofgem will be expected to take into account to ensure that its regulatory decisions align with the Government's broader policy agenda; and
- Regulatory transparency - Ofgem will be required to annually set out how it plans to contribute to its strategic goals and how it will monitor progress.
Delivery Review
The Delivery Review forms part of DECC's ongoing work in improving its delivery capability. It considered the relationship between DECC and its main delivery partners, particularly these bodies' accountability to Ministers, value for money and the need for a clear distinction between policy-makers and those tasked with delivery.
Although the Review concluded that the current delivery arrangement is generally working well, new measures were proposed to assist DECC in reacting to future delivery challenges:
- Delivery of new programmes and Green Deal activities should be led by DECC so as to ensure accountability, unless there is an obvious argument for delivery by a third party;
- Focus of the delivery of energy efficiency objectives through the Green Deal with delivery put out to competitive tender, where appropriate, to provide maximum value for money;
- From 2012/2013 the Carbon Trust and the Energy Saving Trust will no longer receive core grant funding but will be expected to compete for services put out to tender and to develop other commercial opportunities; and
- Creation of an Office for National Energy Efficiency within DECC to provide a wider energy efficiency strategy, strong programme management and a consistent view of the offer to the customer.
