DECC prepares Ofgem for clearer low carbon role
Review hints at greater role for regulator in enforcing green energy legislation
The government has provided the clearest signal yet that energy regulator Ofgem will play a greater role in overseeing and enforcing low carbon policies over the next decade, following the publication of a major review into the watchdog’s role.
The conclusions of the review, published today, recommend that the coalition introduce new legislation that sets high-level strategic goals that the regulator is under a statutory requirement to help meet.
These new goals are expected to include a range of environmental and energy security targets, alongside the regulator’s core role of ensuring value for money for energy customers.
“A strong, independent regulator will be crucial to building the secure, affordable, low carbon energy we need,” said Energy and Climate Change Secretary Chris Huhne, welcoming the report’s recommendations.
“We are proposing to set clear goals which Ofgem must play its part in meeting, so that industry and consumers know the rules of the game.”
Specifically, the government will set out clear strategic goals for Ofgem in a new Strategy and Policy Statement.
A spokesman for the Department of Energy and Climate Change confirmed that the Statement will have a “statutory underpinning and will be implemented as soon as parliamentary time allows”.
He added that the full report of the Ofgem Review providing further details on the role of the watchdog will be published with the Electricity Market Reform White Paper before the summer recess.
The latest recommendations will also task Ofgem with reporting annually on how it plans to deliver its contribution to the government’s strategic goals.
Ofgem has in recent years played an increasing role in supporting low carbon energy policy, and in 2009 formed a dedicated division, Ofgem E-Serve, tasked with supporting and delivering environment, energy and efficiency initiatives.
However, critics have long maintained that the regulator’s primary focus on issues relating to market competitiveness and energy bills has at times conflicted with the need to support low carbon policies that can lead to a short-term increase in energy bills.
Today’s report concluded that “while the fundamentals of the system for economic regulation are sound, the breadth of the contribution that the energy sector is now expected to make to wider public policy goals, and the scale of the challenges ahead, has made the world of 2011 very different from that of the 1980s”.
In particular, it noted that the requirement to reduce greenhouse gas emissions, deliver greater renewable energy and tackle fuel poverty had complicated Ofgem’s role to a point where a clear single set of government-defined goals would serve to bolster the regulator’s effectiveness.
The government has provided the clearest signal yet that energy regulator Ofgem will play a greater role in overseeing and enforcing low carbon policies over the next decade, following the publication of a major review into the watchdog’s role.
The conclusions of the review, published today, recommend that the coalition introduce new legislation that sets high-level strategic goals that the regulator is under a statutory requirement to help meet.
These new goals are expected to include a range of environmental and energy security targets, alongside the regulator’s core role of ensuring value for money for energy customers.
“A strong, independent regulator will be crucial to building the secure, affordable, low carbon energy we need,” said Energy and Climate Change Secretary Chris Huhne, welcoming the report’s recommendations.
“We are proposing to set clear goals which Ofgem must play its part in meeting, so that industry and consumers know the rules of the game.”
Specifically, the government will set out clear strategic goals for Ofgem in a new Strategy and Policy Statement.
A spokesman for the Department of Energy and Climate Change confirmed that the Statement will have a “statutory underpinning and will be implemented as soon as parliamentary time allows”.
He added that the full report of the Ofgem Review providing further details on the role of the watchdog will be published with the Electricity Market Reform White Paper before the summer recess.
The latest recommendations will also task Ofgem with reporting annually on how it plans to deliver its contribution to the government’s strategic goals.
Ofgem has in recent years played an increasing role in supporting low carbon energy policy, and in 2009 formed a dedicated division, Ofgem E-Serve, tasked with supporting and delivering environment, energy and efficiency initiatives.
However, critics have long maintained that the regulator’s primary focus on issues relating to market competitiveness and energy bills has at times conflicted with the need to support low carbon policies that can lead to a short-term increase in energy bills.
Today’s report concluded that “while the fundamentals of the system for economic regulation are sound, the breadth of the contribution that the energy sector is now expected to make to wider public policy goals, and the scale of the challenges ahead, has made the world of 2011 very different from that of the 1980s”.
In particular, it noted that the requirement to reduce greenhouse gas emissions, deliver greater renewable energy and tackle fuel poverty had complicated Ofgem’s role to a point where a clear single set of government-defined goals would serve to bolster the regulator’s effectiveness.
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