Dermot Nolan: Ofgem’s challenges and plans for 2016/17

Blog

Dermot Nolan

Publication date

Industry sector

Supply and Retail Market

Welcome to our first Ofgem blog. We’ll be blogging regularly about our work to protect consumers’ interests and about the industry more widely. You'll be hearing from staff across Ofgem, not just me. 

As it’s our first blog and it’s January I thought it apt to write about what I see as our challenges and plans for the year ahead.

The most obvious challenge ahead is for companies to earn back consumers’ trust. For me, two things are important for this – better customer service, and fair prices. Our goal must be to ensure that prices reflect efficient costs but also work to build consumer confidence and trust that they’re getting a fair deal and can expect to be treated well by their energy companies.

The current public interest in the relationship between wholesale and retail prices indicates how important an issue this is. I’ve been vocal that in a properly competitive market, I’d expect suppliers to pass drops in wholesale energy costs on to consumers. Because I’m concerned that competitive pressure is still lacking, one of my first acts as Ofgem CEO was to refer the market to the Competition and Markets Authority and I await its conclusions. I hope this will go some way to re-establishing trust in the energy market.

We’re playing our part. We want suppliers to compete on service as well as price. To put pressure on them to do so, we’re shining a light on their performance, so that people can take this into account when switching supplier, and judge for themselves. We’re doing a lot of work to protect the most vulnerable, and I’m passionate about this. For example, we’re continuing our important work on how best to protect and empower prepayment meter customers.

Less obvious to consumers but equally challenging and important, is that the way we use and produce energy is radically changing. In the future, we could have much bigger networks criss-crossing the country to allow for more electricity in heat and transportation, or we could see smaller networks as people use energy from local sources. In either case, we need to ensure any infrastructure is delivered efficiently, and where possible, by competitive processes.

This requires regulation and the physical networks to innovate to keep pace. That’s why one of Ofgem’s priorities this year is the appropriately-named flexibility project which will look at how to address these challenges. Another will look at a future regulatory framework that encourages rapid innovation while making sure consumers are protected. This is a difficult balance to find but is absolutely crucial.

Government’s energy schemes are another big part of the energy landscape. These may change significantly over the next few years, and we will advise Government on its decisions as well as continue to deliver the schemes in the most effective way.

This is a glimpse of our challenges and priorities for 2016. If you want to find out more and have your say, please read our 2016/17 draft forward work programme.