Office of Gas and Electricity Markets

The Office of Gas and Electricity Markets (Ofgem), supporting the Gas and Electricity Markets Authority (GEMA), is the government regulator for the electricity and downstream natural gas markets in Great Britain. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of Gas Supply (Ofgas).

Office of Gas and Electricity Markets
Welsh: Swyddfa’r Marchnadoedd Nwy a Thrydan
Ofgem
Non-ministerial government department overview
Preceding agencies
  • Office of Electricity Regulation
  • Office of Gas Supply
JurisdictionUnited Kingdom
Headquarters10 South Colonnade, Canary Wharf, London, E14
Employees761
Annual budgetFor 2015–2016 Parliament approved through the Main Estimate: a gross resource budget of £89.500 million [1] £50.6 million (2009–2010) [2]
Minister responsible
Non-ministerial government department executive
  • Dermot Nolan, Chief Executive
Websitewww.ofgem.gov.uk

Powers and duties

The authority's powers and duties are largely provided for in statute (such as the Gas Act 1986, the Electricity Act 1989, the Utilities Act 2000, the Competition Act 1998, the Enterprise Act 2002 and the Energy Act 2004,[3] the Energy Act 2008[4] and the Energy Act 2010[5]) as well as arising from directly effective European Union legislation. Duties and functions concerning gas are set out in the Gas Act and those relating to electricity are set out in the Electricity Act.

Its primary duty is to protect the interests of consumers, where possible by promoting competition.[6]

The Authority‘s main objective is to protect existing and future consumers' interests in relation to gas conveyed through pipes and electricity conveyed by distribution or transmission systems. Consumers' interests are their interests taken as a whole, including their interests in the reduction of greenhouse gases and in the security of the supply of gas and electricity to them.[7] Since 2010 the Authority has imposed nearly £100 million in fines and redress levies against energy suppliers, including a £12 million redress levy on E.ON in May 2014,[8] and a £1 million redress levy on British Gas in July 2014.[9]

Structure

The Gas and Electricity Markets Authority is governed by the Chairman Martin Cave, executive members as well as non-executive members.[10]

Dermot Nolan was appointed Chief Executive of Ofgem in 2014.[10]

Ofgem is divided into Ofgem (Smarter Grids & Governance, Markets, Sustainable Development and Group Finance Director) and Ofgem E-Serve containing Group Functions: Environmental Programmes, Operations/HR, Information Management and Technology, Finance and Risk Management, and Commercial: Offshore, Legal, Smart Metering Delivery, New Schemes Development.[10]

Development of competition in the UK market

The liberalisation and privatisation of the energy markets in the United Kingdom began with the Margaret Thatcher Government in the 1980s (often called the Thatcher-Lawson agenda, due to the key role of Nigel Lawson in the Thatcher government cabinet). Aspects of the Ofgem model have been adopted by EU legislation.[11]

Starting in the 1990s, the supply of electricity and gas to end consumers in the UK has been unbundled from the rest of the industry. At the time of privatisation, British Gas and one regional public electricity supplier (PES) held a monopoly on supplying all domestic gas and electricity consumers respectively in Great Britain. Between 1996 and 1999, domestic energy consumers gradually had to choose their supplier, and finally in May 1998, the domestic gas market was fully opened to competition, closely followed by the domestic electricity market in May 1999.[12]

Before there was competition on domestic markets, Ofgem set price controls fixing maximum price that the monopoly suppliers could charge domestic customers. These price controls remained in place when markets started to get liberalised, and were then gradually removed between 2000 and 2002. Ofgem’s decision to remove price controls was based on the assessment that competition was developing well at that time and that the Competition Act 1998, being effective since March 2000, would deter companies from the abuse of market power, and provide Ofgem with sufficient power to tackle any abuse. Moreover, consumer surveys showed good awareness of the ability to switch, high and rising switching rates away from the former monopoly supplies, and substantial and continuing falls in their market shares.[13]

In 2000, the Social Action Strategy review group was established and the Competition Act came into force. In 2003 the Wholesale Gas Probe was published. Two years after the removal of the last price controls, in April 2004, Ofgem published a major review of the state of competition in the domestic energy supply markets, concluding that supply competition had delivered substantial benefits for all consumers and that the markets were competitive, though not yet mature. In 2005 there was the EU Energy Sector Enquiry, as well as the Supply Licence Review. The Energy Supply Ombudsman was then established in 2006 and in 2008 the Energy Supply Probe was published.[14]

Against the background of unprecedented increases in world fuel prices leading to record increases in wholesale and retail gas and electricity prices so that a typical household's energy bills more than doubled since early 2004 Ofgem undertook the Energy Supply Probe. The numbers of consumers in debt to their energy suppliers, average debt levels and disconnection rates were all rising. These energy price rises came at a time when household budgets were under pressure from the rising cost of food, petrol, mortgages and other essentials. Vulnerable consumers and those in fuel poverty were particularly affected. The Energy Supply Probe published the findings on the operation of the UK retail energy markets and set out a package of measures to tackle the issues raised.[15]

CMA investigation

In June 2014 Ofgem announced a Competition and Markets Authority (CMA) investigation into the trading practices and competitiveness of the country's major energy companies: Centrica, SSE plc, RWE npower, E.ON, Scottish Power and EDF Energy. The investigation, which took two years, followed a referral by Ofgem to the competition regulator. "There is near-unanimous support for a referral and the CMA investigation offers an important opportunity to clear the air. This will help rebuild consumer trust and confidence in the energy market as well as provide the certainty investors have called for," Ofgem CEO Dermot Nolan in announcing the investigation.[16] In August 2016 Ofgem said that it would implement the CMA's recommendation that suppliers should be required to provide the details of customers who have been on expensive tariffs for three years or more to rival suppliers. Ofgem also said that it would impose an interim price cap on customers using pre-payment meters.[17]

Allegations of abuse of power relating to whistleblowers

In September 2018, the Guardian published a report claiming that two OFGEm experts had been independently threatened with criminal sanctions if they publicly revealed information. OFGEM allegedly invoked section 105 of the Utilities Act 2000, designed to protect national security, relating to concerns about energy meters and renewable heat incentive projects.[18]

Alternative Dispute Resolution (ADR)

Under the Alternative Dispute Resolution for Consumer Disputes Regulations 2015, if an energy company fails to resolve a complaint through their own customer service efforts they will be required to advise the consumer of an approved ADR body.

Ofgem is the Competent Authority responsible for approving ADR entities in the energy sector.  Ofgem has only ever approved one ADR entity; Ombudsman Services[19].

See also

References

  1. ^ Ofgem Annual Report 2015–2016 (PDF), Office of Gas and Electricity Markets, 15 June 2016, retrieved 15 December 2016
  2. ^ Ofgem Annual Report 2009-2010 (PDF), Office of Gas and Electricity Markets, 15 July 2010, retrieved 18 December 2010
  3. ^ "The UK Statute Law Database: The Energy Act 2004". Statutelaw.gov.uk. Retrieved 13 January 2013.
  4. ^ "The UK Statute Law Database: The Energy Act 2008". Statutelaw.gov.uk. 27 May 2011. Retrieved 13 January 2013.
  5. ^ "The UK Statute Law Database: The Energy Act 2010". Statutelaw.gov.uk. Retrieved 13 January 2013.
  6. ^ "The role of energywatch and Ofgem" (PDF). p. 2. Archived from the original (PDF) on 8 September 2008. Retrieved 13 January 2013.
  7. ^ "Ofgem Electricity and Gas Supply Market Report September 2010" (PDF). pp. 19–21. Retrieved 13 January 2013.
  8. ^ "E.On to reimburse 12mn pounds to customers for mis-selling power". The UK News. Retrieved 17 May 2014.
  9. ^ "BG pays compensation for mis-sold contracts". Britain News.Net. Retrieved 5 July 2014.
  10. ^ a b c "Gas and Electricity Markets Authority" (webpage). Retrieved 13 January 2013.
  11. ^ "Energy: What do we want to achieve? - European Commission". Ec.europa.eu. Retrieved 13 January 2013.
  12. ^ "Energy Supply Probe - Initial Findings Report" (PDF). pp. 18–20. Retrieved 13 January 2013.
  13. ^ "Energy Supply Probe - Initial Findings Report" (PDF). p. 20. Retrieved 13 January 2013.
  14. ^ "Energy Supply Probe - Initial Findings Report" (PDF). pp. 20–21. Retrieved 13 January 2013.
  15. ^ "Energy Supply Probe — Initial Findings Report" (PDF). pp. 22–27. Retrieved 13 January 2013.
  16. ^ "UK market regulator to probe power utilities' operations". The UK News. Retrieved 27 June 2014.
  17. ^ Mehreen Khan (3 August 2016). "Ofgem approves plans to reduce energy bills". Financial Times. Retrieved 3 August 2016.
  18. ^ Nick Hopkins (17 September 2018). "Ofgem exploited national security law to silence us, whistleblowers claim". Guardian newspapers. Retrieved 17 September 2018.
  19. ^ ADR information, Adr (September 2015). "Ofgem website". Ofgem.

External links

British Energy Efficiency Federation

The British Energy Efficiency Federation (or BEEF) was founded in 1996 by the United Kingdom Government to provide a forum for consultation between existing industry associations in the energy sector.

British Gas plc

British Gas plc was an energy and home services provider in the United Kingdom. It was formed when the British Gas Corporation was privatized in December 1986, as a result of the privatizations instigated by the government of Margaret Thatcher.

Distribution network operator

Distribution network operators (DNOs) are companies licensed to distribute electricity in Great Britain by the Office of Gas and Electricity Markets.

There are fourteen licensed geographically defined areas, based on the former area electricity board boundaries, where the distribution network operator distributes electricity from the transmission grid to homes and businesses. Under the Utilities Act 2000 they are prevented from supplying electricity; this is done by a separate electricity supply company, chosen by the consumer, who makes use of the distribution network.

Distribution network operators are also responsible for allocating the core Meter Point Administration Number used to identify individual supply points in their respective areas, as well as operating and administering a Meter Point Administration System that manages the details relating to each supply point. These systems then populate ECOES (Electricity Central Online Enquiry Service), the central online database of electricity supply points. Their trade association is the Energy Networks Association.

Electricity Act 1989

The Electricity Act 1989 provided for the privatisation of the electricity supply industry in Great Britain, replacing the Central Electricity Generating Board in England and Wales and in Scotland by the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board. The Act also established a licensing regime and a regulator for the industry called the Office of Electricity Regulation (OFFER), which has since become the Office of Gas and Electricity Markets (OFGEM).

Energy Institute

The Energy Institute (EI) is a UK chartered professional membership body.

Energy Networks Association (United Kingdom)

The Energy Networks Association (ENA) is the industry body funded by UK gas and electricity transmission and distribution licence holders.

Energy Retail Association

The Energy Retail Association (ERA) was a trade association which promoted the interests of electricity and gas retailers in the domestic market in Great Britain, formed in 2003. In April 2012 it merged with the Association of Electricity Producers and the UK Business Council for Sustainable Energy to become Energy UK.

New Electricity Trading Arrangements

New Electricity Trading Arrangements (NETA) is the system of market trading arrangements under which electricity is traded in the United Kingdom's wholesale electricity market as of 27 March 2001. The arrangements provided that parties could trade off their imbalances close to real time.

Non-ministerial government department

Non-ministerial government departments (NMGDs) are a type of British government department that deal with matters for which direct political oversight has been judged unnecessary or inappropriate. They are headed by senior civil servants. Some fulfil a regulatory or inspection function, and their status is therefore intended to protect them from political interference. Some are headed by a permanent office holder, such as a Permanent Secretary or Second Permanent Secretary.

Northern Electric

Northern Electric was an electricity supply and distribution company serving north east England.

Opus Energy

Opus Energy Limited supplies gas and electricity to businesses across the United Kingdom. It purchases electricity from wind, solar, hydro, and anaerobic digestion generators, and provides support to develop energy-generating sites. It is headquartered in Northampton, United Kingdom with an additional office in Oxford.

Regal Petroleum

Regal Petroleum plc is a petroleum company based in London with assets in Romania, Ukraine, Greece, and Egypt. It was founded by Frank Timiş in November 1996, and is listed on the London Alternative Investment Market.

Regulatory agency

A regulatory agency (also regulatory authority, regulatory body or regulator) is a public authority or government agency responsible for exercising autonomous authority over some area of human activity in a regulatory or supervisory capacity. An independent regulatory agency is a regulatory agency that is independent from other branches or arms of the government.

Regulatory authorities are commonly set up to enforce safety and standards, and/or to protect consumers in markets where there is a lack of effective competition or the potential for the undue exercise of market power. Examples of regulatory agencies that enforce standards include the Food and Drug Administration in the United States and the Medicines and Healthcare Products Regulatory Agency in the United Kingdom; and, in the case of economic regulation, the Office of Gas and Electricity Markets and the Telecom Regulatory Authority in India.

Renewables Obligation (United Kingdom)

The Renewables Obligation (RO) is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form (the Renewables Obligation (Scotland)) in Scotland in April 2002 and in Northern Ireland in April 2005, replacing the Non-Fossil Fuel Obligation which operated from 1990.The RO places an obligation on licensed electricity suppliers in the United Kingdom to source an increasing proportion of electricity from renewable sources, similar to a renewable portfolio standard. In 2010/11 it is 11.1% (4.0% in Northern Ireland). This figure was initially set at 3% for the period 2002/03 and under current political commitments will rise to 15.4% (6.3% in Northern Ireland) by the period 2015/16 and then it runs until 2037 (2033 in Northern Ireland). The extension of the scheme from 2027 to 2037 was declared on 1 April 2010 and is detailed in the National Renewable Energy Action Plan. Since its introduction the RO has more than tripled the level of eligible renewable electricity generation (from 1.8% of total UK supply to 7.0% in 2010).

Score Group plc

Score Group plc is an international engineering business based in Peterhead, Scotland.

Sunbury Research Centre

The Sunbury Research Centre -- also known as ICBT Sunbury -- is a main research institute of BP in north-east Surrey.

UK Power Networks

UK Power Networks is a distribution network operator for electricity covering South East England, the East of England and London. It manages three licensed distribution networks (Eastern Power Networks PLC, South Eastern Power Networks PLC and London Power Networks PLC) which together cover an area of 30000 square kilometres and approximately eight million customers.

In 2014 UK Power Networks was awarded £25 million from the electricity regulator Ofgem's Low Carbon Networks Fund for the Low Carbon London project. In 2011 it was awarded £6.7 million by Ofgem for another project, Flexible Plug and Play, which is researching new ways, technical and commercial, to connect renewable energy to the distribution network in Cambridgeshire.

As well as the three distribution arms UK Power Networks also operates UK Power Networks Services Holdings Limited, which develops and maintains electrical networks for clients including London Underground, Heathrow and Stansted airports, Docklands Light Railway and Canary Wharf.

Western Power Distribution

Western Power Distribution is the trading identity of four electricity distribution companies - WPD South West (operating in South West England), WPD South Wales (operating in South Wales) and WPD Midlands (operating in East Midlands and West Midlands). All of the companies act as the distribution network operator for their respective regions, and are registered in Bristol, England. Western Power Distribution serves approximately 7.7 million customers over its combined distribution areas.

Western Power Distribution is a subsidiary of the American utility corporation PPL.

It should not be confused with WPD, a wind farm company in north-western Europe, or Western Power Corporation, an electricity distributor in Australia.

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