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Regular, regulate, regulation, regulator. Possibly amongst the least inspiring words in the English language, however, their meaning and impact far outweigh their modest promise.
Almost everything we do, see and experience is regulated in some way or another, and energy is no different.
The task of regulating the UK energy sector ostensibly falls on Ofgem, the Office of Gas and Electricity Markets, however their responsibilities and remits aren't the full extents of the governance of the UK energy market.
Ofgem is what is known as a non-ministerial department within the UK government. They have this status in common with as diverse a set of organizations as the Crown Prosecution Service, the Forestry Commission, National Savings and Investments and Ordnance Survey.
In total there are 22 of these Non-Ministerial departments.
These sit alongside a further 24 Ministerial departments, which in turn sit alongside the 2 senior departments for the Prime Minister’s Office and the Deputy PM’s office.
Those of you who know Lloyd Energy well will already be aware of the links we have to 10 Downing Street and our activities supporting the Prime Minister’s Office. But it is also our relationship with the ministerial department responsible for energy, DECC, and their non-ministerial department, Ofgem, that takes up a great deal of our focus.
Within the 24 Ministerial Departments alongside DECC, there are the well known and the not so well known, for every Department of Education there is a UK Export Finance department. Within this range though it is DECC (the Department of Energy and Climate Change) and the Department for Business, Innovation, and Skills (BIS) that have the greatest resonance in the business and energy markets.
DECC is led by Secretary of State Ed Davey (Lib Dem) and has as its mission statement:
DECC doesn’t manage this alone, in addition to Ofgem, it's main supporting Non-Ministerial department it is also allied to Executive non-departmental public bodies and Advisory non-departmental public bodies including:
Quite a list, but this pales compared to the number of agencies and bodies supporting BIS, led by Vince Cable (Lib Dem).
There are 47 supporting functions ranging from the Competition and Markets Authority (of real relevance to the energy market right now as Ofgem has called on the CMA to undertake an investigation into the workings of the market) through the Insolvency Service, Companies House and onto the UK Space Agency!
DECC however and more particularly Ofgem is our focus in this guide.
For its part, as the ‘boss’ of the relationship DECC takes overall responsibility for:
Whilst Ofgem is tasked with delivering on the instruction of DECC with a particular focus on:
Following DECCs remit Ofgem regulates the monopoly companies that run the gas and electricity networks. It takes decisions on price controls and enforcement, acting in the interests of consumers and helping the industries to achieve environmental improvements.
However, Ofgem lists their principal objective as:
“Protect[ing] the interests of existing and future electricity and gas consumers”
Ofgem itself actually came into being before DECC, under the Utilities Act 2000
As part of the Act, the Gas and Electricity Markets Authority (GEMA) was established with a focus on
“regulating the gas and electricity markets in Great Britain”.
Ofgem is effectively the executive arm of GEMA
GEMA replaced the activities and powers under the previous roles of the Director-General of Gas Supply and the Director-General of Electricity Supply, which was abolished under the Act.
GEMA’s powers are provided for under the following Acts:
GEMA, in turn, governs Ofgem by determining its strategy, setting policy priorities and making decisions on a wide range of regulatory matters, including price controls and enforcement.
Ofgem, in turn, regulates the gas and electricity networks and the competitive markets in gas and electricity supply and retail. The protection of consumer interests lies at the heart of Ofgem’s role, including reducing greenhouse gas emissions and improving security of supply.
To complicate matters further the DECC / GEMA / Ofgem relationship is not only influenced by the UK government but is also determined by EU policy and directives. This makes Ofgem’s work multi-faceted with a significant number of varied ‘stakeholders’ to keep happy
Ofgem doesn’t operate as a consumer or direct end-user organization per se. Rather they will monitor, investigate and report findings on issues within the regulated markets where there is a material volume of complaints or concerns raised about the industry.
In April 2014 however, Ofgem launched a customer-facing website and information service called ‘go energy shopping’ goenergyshopping.co.uk This was the earliest initiative from Ofgem to promote greater engagement with the end-user and to encourage participation in the market in order to drive competition.
Indeed it’s been a busy few years for Ofgem.Ofgem launched the Retail Market Review in 2010, a review that has subsequently developed into a forensic, industry-wide review covering all aspects of the market, busting long-held myths and motivating change for the benefit of the energy consumer.
In addition, Ofgem was the subject of a major review of its funding, effectiveness, and focus which was completed by DECC in 2011.
The Retail Market Review (RMR) grew through 2011 and 2012 to convey its final recommendations in 2013. Whilst we do not agree with all the outcomes and believe that in many areas it does not go far enough to revolutionize the energy market we are generally supportive of Ofgem’s findings. 2014 has seen the initial implementations from the RMR's recommendations. These range from the publishing of contract end dates on customer invoices to revised business definitions and clarification over the objections processes.
Indeed 2014 has been a watershed year for Ofgem with the long-expected referral of the UK energy market to the Competition and Markets Authority (CMA), the old Competition Commission. Ofgem, under quite some political pressure has asked the CMA to investigate as to whether the market as governed by Ofgem is delivering on its promise of open competition and fair treatment of customers.
So whilst Ofgem isn’t an organization that directly interacts with those consumers that it is mandated to protect, it is beginning to recognize the import of engagement and entering into activities to encourage market participation.
The incredibly future of Ofgem has and continues to be in suspicion and the advent of the CMA investigation, RMR and the ‘Go Energy Shopping’ initiative are the culmination of a thorough review and critique of the activities of Ofgem in their role as regulator.
On a practical level, and admittedly rather confusingly, Ofgem is not a party that as an individual or business you can effectively complain to.
To add to the confusion, the body that was Consumer Focus, and which became Consumer Futures has now become the plain old Citizens Advice Bureau www.citizensadvice.org.uk unfortunately however their remit, unlike the old Consumer Focus organization does not extend to businesses, leaving the non-domestic customer somewhat short-changed from consumer protection policy.
For businesses the first port of call, therefore, will be the business who is responsible for the issue causing the complaint to arise. This maybe your business energy supplier, or the allotment network that delivers the energy to your premise.
Whilst Ofgem will ultimately take an interest in a high volume of similar complaints about common issues and companies, this will be done from a market investigation perspective rather than active customer engagement.
Where calling your supplier or distributor does not resolve the issue to a satisfactory level the Energy Ombudsman, part of Ombudsman Services, www.ombudsman-services.org is the next port of call. The Energy Ombudsman gives independent and impartial decisions on energy complaints and is a free service designed to put you back into a position as if nothing had gone wrong in the first place.
Ofgem’s failure to actively handle complaints should not be seen as the sum total of their activities On the contrary Ofgem are:
So whilst Ofgem’s direct interaction with business energy consumers is limited, the hope and intention are that, like the dictionary definition, the influence of their organization on the business constituency is significantly more inspiring than the name suggests.
To find out more about the energy market and how working with Lloyd energy can benefit your organization gives us a call on 0800-0488-472 we'd love to hear from you.