Forward work programme 2021/22 consultation

Publication date
15th December 2020
Closing date
19th February 2021
Policy areas
Status

Building a greener, fairer energy system for households and businesses in Great Britain

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Contents

  1. Foreword from our chief executive
  2. Introduction
  3. How to respond to the consultation
  4. Who we are and our objective
  5. Our strategic vision
  6. Point 1: Ofgem’s new strategic framework
  7. Point 2: core regulatory functions
  8. Point 3: delivering government schemes
  9. Point 4: low carbon infrastructure
  10. Point 5: full chain flexibility
  11. Point 6: future of retail
  12. Point 7: data and digitalisation
  13. Point 8: energy system governance
  14. Point 9: transforming Ofgem
  15. Point 10: reducing burdens
  16. Point 11: estimated expenditure

Foreword from our chief executive

Earlier this year I started my five-year term as Ofgem Chief Executive. It is a privilege to be in the role at this critical time, as we work together to support consumers through the pandemic and as climate change negotiations come to the UK in 2021, drive forward decarbonisation of the energy system.

As the regulator, we have two equally important challenges - to protect the interests of consumers today, to make sure they get a fair deal, and in the future by tackling climate change. This is why on my first day as CEO, we published our Decarbonisation Action Plan – a real milestone for Ofgem and a sign of our commitment to supporting this country’s transition to net-zero.

None of us could have imagined what the next few months would bring with the pandemic impacting our economy and society in unprecedented ways. I want to thank all those working in the energy industry during the COVID-19 crisis. I’ve witnessed a real spirit of collaboration and a focus on what really matters – protecting consumers, especially the vulnerable, and ensuring essential works are carried out to maintain energy supplies.

Alongside responding to COVID-19, Ofgem has thought hard about our vision for a greener, fairer energy system and the role that we should play within it, working within the policy framework set by the government. We welcome the government’s plan for a green industrial revolution and will continue to work closely with industry and wider stakeholders to play our part in its delivery.

There are many things that Ofgem needs to do today that we have always done. We will protect energy consumers from unfair pricing, ensure safeguards are in place for vulnerable consumers and drive the high standards and services expected of an essential service. Across the wider energy system, we will work to maintain security of supply, to make sure that systems and codes are managed effectively, and deliver new regulatory approaches to manage cyber risks in our joint role as Competent Authority with the Department for Business, Energy & Industrial Strategy.

We will also continue to run government schemes that support decarbonisation and support some of the most vulnerable in society. Those schemes are already driving the changes we need to hit net-zero and improving outcomes for many vulnerable groups.

Beyond these enduring priorities, we set out in this document five strategic programmes where we believe Ofgem can deliver the greatest impact in the coming years, helping to shape the energy system and deliver real change in the interests of consumers.

  1. We will enable investment in the low carbon infrastructure needed to deliver net zero.
  2. To balance the system and keep costs down as the level of intermittent renewables rises, we will need full chain flexibility, for example, through flexible charging of electric vehicles.
  3. We will deliver a future retail market with innovative new retail products that, for example, enable consumers to benefit from the flexibility they can provide, while ensuring protections are in place for all.
  4. We will unlock the benefits of data and digitalisation to enable these changes at least cost.
  5. We will promote energy system governance arrangements that are fit for the future, including Ofgem’s role.

We set out in this draft forward work programme some of the initial actions we intend to take, and welcome views on which priorities we should focus on as we further develop our work programme for next year.

Of course, to realise this ambitious agenda, Ofgem itself is going to need to change. We are working hard to transform ourselves to be an even more dynamic, inclusive and high-performing organisation as we face the regulatory challenges of tomorrow’s energy market. Central to this is ensuring that Ofgem itself and the wider sector have diverse and inclusive workforces that better represent the consumers we all serve. This will be fundamental to all of our success.

Finally, as the UK – and indeed the world – looks towards COP26 in Glasgow next year, Ofgem is determined not just to do everything we can to support the transition to net-zero in the UK, but also to bring together international regulators to reflect on what we need to do to support and drive forward net-zero across the world.

The current crisis reminds us how important energy is as an essential service to consumers today, and its importance to our economic and environmental future as a society. Our goal is to build an affordable, low carbon energy system – and I look forward to working with you all to deliver this vision that I know we all share.

Jonathan Brearley
Ofgem chief executive

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Introduction

The energy sector is undergoing a major transformation, as we decarbonise our economy and embrace the opportunities of data and digitalisation. Ofgem has a leading role to play in shaping this transformation, promoting a green recovery, and safeguarding the interests of energy consumers. This consultation document sets out a draft forward work programme in 2021/22 for Ofgem, setting out our proposed activities for continuing to build a greener, fairer energy system for consumers. We welcome your views on how our proposed activities in 2021/22 will help us best achieve our principal objective to ‘protect the interests of existing and future consumers’.

In 2019, we set out our Strategic Narrative, which framed our high-level priorities over a five-year time period. In order to build on this and achieve greater focus, we have developed a new strategic framework that builds on the principles of our Strategic Narrative. The framework is made up of two enduring priorities and five strategic change programmes. The strategic change programmes will focus Ofgem’s effort and resources where we can have the greatest impact on shaping the energy sector and enabling the net-zero transition in the interests of energy consumers. This draft forward work programme document sets out the key activities that we intend to undertake in 2021/22 under each of our strategic change programmes.

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How to respond to the consultation

In the sections below, we have set out our emerging thinking on the activities we believe that we should prioritise in the coming year. We welcome your views on our new strategic framework and the identified activities.

As always, we will continue to respond to unforeseen events in our planning, such as with our ongoing response to the COVID-19 pandemic. Proposals in this consultation may be altered as a result of such events. 

Please respond to this consultation by emailing your response to FWP@Ofgem.gov.uk by noon, Friday, 19 February. Unless you ask us not to, we will publish all responses on our website. A final version of our 2021/22 forward work programme will be published by 31 March 2021.

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Who we are and our objective

The Gas and Electricity Markets Authority (the ‘Authority’), consists of non-executive and executive members, and a non-executive chair and operates through the Office of Gas and Electricity Markets (‘Ofgem’), which is a non-ministerial government department. In this consultation, the terms Ofgem and the Authority are used interchangeably.

The Authority determines strategic direction, sets policy priorities and makes decisions on a wide range of regulatory issues, including price controls and enforcement.

Our objective is to protect consumers’ interests now and in the future by working to deliver a greener, fairer energy system. We do this by:

  • Working with government, industry and consumer groups to deliver a net-zero economy, at the lowest cost to consumers
  • Stamping out sharp and bad practice, ensuring fair treatment for all consumers, especially the vulnerable
  • Enabling competition and innovation, which drives down prices and results in new products and services for consumers.

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Our strategic vision

At Ofgem, we realise that the next decade is critical for a successful transition to a low carbon, digitally-enabled energy system. By 2025, our vision is for an energy system to be on track for net-zero, delivered in the interests of consumers, including:

  • Energy consumers receiving good value energy services and fair treatment from innovative, world-class, energy companies, with protections for the vulnerable
  • An electricity sector able to function without fossil fuels, with a growing share of low-cost renewables, alongside the development and deployment of other sources of low carbon power
  • Rapid growth in the use of electric vehicles (EVs), heat pumps and heat networks, and decisions taken on the role of hydrogen
  • To minimise costs, increasing levels of flexibility throughout the system, with energy consumers routinely using smart technology to shift demand
  • A data-enabled energy sector, with ubiquitous smart metering and open access to data stimulating new services and markets, and reducing costs.

On 14 December, the UK Government published its Energy White Paper, setting out its goals for the future of the energy sector, including its intention to develop a Strategic Policy Statement1 for Ofgem. We welcome this further clarity from the government. The management of the energy sector, in particular the transition to net zero, requires a partnership between the regulator, governments, energy companies, and energy consumers.

[1] As set out in the Energy Act 2013, section 131 – Designation of a statement

Our role in delivering a greener, fairer energy system

Delivering on our vision will require Ofgem to take a leadership role in the transformation of the energy sector, establishing itself as a world leader in regulating for decarbonisation, making effective use of data, and taking a whole system approach to deliver net-zero at the lowest cost.

We will use our powers to regulate and hold companies to account, to promote competition, innovation and energy sector resilience. We will continue to deliver environmental and social schemes for the government. Collaborating closely with government, industry and other stakeholders, we will focus where we can have the greatest impact.

Alongside the implementation of our new strategic framework, we are undertaking a transformation programme to make Ofgem a more dynamic, inclusive and high performing organisation. We will also be considering ‘how we regulate’ in this increasingly fast-moving sector, and intend to produce guidance to replace Ofgem’s now retired Regulatory Stances.

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Point 1: Ofgem’s new strategic framework

In 2019, we published our Strategic Narrative, which identified three core priorities for Ofgem:

  • Protecting consumers, especially the vulnerable, stamping out sharp practice and ensuring fair treatment.
  • Decarbonising to deliver a net-zero economy at the lowest cost.
  • Enabling competition and innovation, which drives down prices and results in new products and services.

Building on that narrative, we have now identified five areas where we believe transformative change is required and where we should focus our efforts to achieve the greatest impact, alongside our core regulatory responsibilities.

Our new strategic framework has two enduring priorities and five strategic change programmes to help deliver the transition to net-zero in the interests of consumers.

Enduring priorities

  1. Our core regulatory functions to regulate the sector and protect the interests of consumers.
  2. The delivery of current and new government schemes to support vulnerable consumers and advance decarbonisation.

Strategic change programmes

  1. To enable investment in low carbon infrastructure at a fair price.
  2. To deliver full chain flexibility in how we generate, use and store energy.
  3. To deliver a future retail market that works for all consumers and the planet.
  4. To unlock the benefits of data and digitalisation.
  5. To ensure energy system governance, including Ofgem, are fit for the future.

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Point 2: core regulatory functions

We will continue to strive for excellence in delivering our core statutory and regulatory functions, protecting the interests of energy consumers, while conducting our activities as cost-effectively as possible. In 2021/22:

  • We will deliver against our principal objective through our:
    • established retail and wholesale market monitoring (including for the default tariff price cap)
    • compliance and enforcement activity
    • codes and licensing work (including the new rules we have introduced to drive up supplier financial and customer service standards and our Supplier of Last Resort process)
    • ongoing regulation of the networks and regulatory policy promoting the continuing effectiveness of wholesale markets
    • role supporting security of supply in the energy system.
  • As we reach the end of the transition period between the United Kingdom (UK) and the European Union (EU), we will continue to be vigilant and ensure that market and consumer protection arrangements continue to operate by working with our EU counterparts on cross-border electricity methodologies and end of transition code and licence updates.
  • We will also continue to implement our responsibilities as the joint Cyber Competent Authority with the Department for Business, Energy and Industrial Strategy (BEIS) for downstream gas and electricity.

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Point 3: delivering government schemes

Ofgem administers a range of environmental and social schemes on behalf of the government and for the devolved administrations, which collectively are worth £9 billion per annum. Our schemes fall into three main categories – renewable electricity schemes, renewable heat schemes and energy efficiency and social schemes.

2021/22 will be a key year for heat decarbonisation schemes, as the current Renewable Heat Incentive schemes close to new participants, and will launch the new Green Gas Support scheme. More broadly, we will continue to work actively with the government to develop future policies and will work on a programme to strengthen our scheme systems, improving delivery and efficiency over the coming years.

All of the government schemes that we administer support our new strategic change programmes, most notably the drive towards decarbonisation:

  • Renewable Electricity Schemes - these schemes have laid the foundation to deliver the transition set out in our Decarbonisation Action Plan, towards low carbon infrastructure. Moving forward, the schemes will continue to support renewable generation, ranging from domestic solar panels to the largest wind farm.
  • Renewable Heat Schemes - these schemes have supported early adopters of technologies like heat pumps and biogas injection, and have moved the UK towards lower-carbon energy networks.
  • Energy Efficiency and Social Schemes - these schemes provide direct support for vulnerable consumers and energy efficiency measures, which reduce the amount of energy generation needed. They also provide routes for innovation for new technologies and monitoring systems to be trialled.

One of our key drivers across all of these schemes is to ensure that public funds are protected. To that end, we employ data-driven statistical and targeted auditing, to ensure that participants on the schemes comply with the rules that are set out in regulation or legislation. This is managed through our hub model, which provides functional expertise for delivery, assurance and policy and engagement.

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Point 4: low carbon infrastructure

The transition to net-zero requires a major transformation of the energy sector: the continued decarbonisation of power; the electrification of most surface transport; and moving to low carbon energy sources for heating our homes and workplaces. In some areas, there is broad consensus on the direction of travel – for example, the accelerating deployment of renewable power and electric vehicles. However, there remains uncertainty on key questions such as the roles of hydrogen in heat, and how much nuclear power and carbon capture and storage (CCS) will be needed.

Major investment will be required to deliver net-zero in the energy sector. In addition to £30 billion of investment recently approved in our electricity transmission and gas network price controls, we have introduced a new mechanism with the flexibility to approve more than £10 billion of additional net-zero expenditure over the next five years. Additional expenditure will also be required in distribution networks, new power generation and the deployment of low carbon technologies, such as heat pumps.

Ofgem will take an active role in facilitating this investment and ensuring it is efficiently spent. We will work collaboratively with the government to enable and encourage the industry to prepare for the future by setting frameworks to help manage uncertainty, and to maximise the opportunities to enable a smart, lower-cost zero-carbon future. Our low carbon infrastructure strategic change programme aims to ensure that the necessary infrastructure enablers are in place by 2025, by:

  • Efficiently transforming the onshore electricity network, connecting new sources of supply and increasing demand needed to meet net-zero targets
  • Taking a coordinated approach to the expansion of the offshore network and interconnectors
  • Providing advice and developing regulatory mechanisms to enable investment in CCS transport and storage and new nuclear power, where requested by the government
  • Preparing gas networks for a transition to a low carbon future, helping understand the feasibility and costs of hydrogen in the gas grid
  • Developing new regulatory approaches and best practices to manage cyber risks to energy infrastructure.

Proposed low carbon infrastructure activities in 2021/22

New activities

We propose to:

  • In our network price controls, establish an approach to facilitate cost-effective, strategic investment to meet growing demand from electric vehicles and heat pumps
  • Provide advice and design regulatory models for investment in CCS and nuclear, where requested by the government
  • Create a framework for a coordinated expansion of offshore networks to enable increased generation and transmission
  • Support the development of an evidence base to inform future heat and hydrogen policies, including potential funding for hydrogen and smart heating trials.

Ongoing activities that support this strategic change programme

We plan to:

  • Establish RIIO-2 network price controls, including a flexible process for running net zero re-openers to facilitate investment to, for example, connect new low carbon generation projects
  • Finalise and publish a decision on cross-border electricity methodology to bring new interconnectors into operation in a post-EU environment
  • Monitor and assess the performance of Operators of Essential Services (gas and electricity) to increase their cyber security and resilience.

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Point 5: full chain flexibility

The case for energy flexibility is widely acknowledged. As the share of intermittent renewable generation rises, and electricity demand from heat and transport grows, the electricity market will need to become more flexible, primarily to enable demand to adjust to the intermittency of supply.

Demand shifting, storage, and interconnection can help dampen the growth in peak demand, reducing costly curtailment of renewables generation and the need for expensive network upgrades. A more flexible electricity system will be more resilient, and easier and less costly to manage. Altogether, these actions can deliver cost savings of more than £5 billion per-annum, primarily from avoided investment in generation plant and network capacity2.

There are potential sources of flexibility throughout the electricity value chain, from generation, through storage and to behaviour change. As a result, we are establishing the full chain flexibility programme, starting by updating our assessment of the applications of flexibility and taking a broad look at the range of approaches to unlocking the highest potential sources, building on existing work set out jointly with BEIS in the 2017 Smart Systems and Flexibility Plan. We will be focusing on:

  • Updating our understanding of the greatest needs and benefits from flexibility across the electricity value chain to achieve a secure, cost-effective system as we decarbonise
  • Understanding how smart electric vehicle (EV) charging and vehicle-to-grid services can be leveraged for the system’s benefit, as the adoption of EVs accelerates
  • Evaluating what mechanisms are available to unlock other demand-side flexibility sources (e.g. domestic heat demand-side responses)
  • Reviewing the potential contribution from location-specific flexibility, and how it is best enabled
  • Assessing the viability and benefits of storage and removing barriers where beneficial
  • Understanding how we can support the decarbonisation of cost-effective ancillary services
  • Working with the industry to help enable flexibility and remove barriers.

As part of this assessment, we will be reviewing our Access Charging Reforms to ensure alignment with the approach that will emerge from the full chain flexibility work. We aim to include findings from our full chain flexibility work in our final forward work programme, which will be published in March 2021. In parallel, we are working with BEIS to develop our joint Smart Systems and Flexibility Plan 2.0, which will be published in 2021.

[2] Pöyry - Imperial College, (2017)

Proposed full chain flexibility activities in 2021/22

New activities

We propose to:

  • Publish the Smart Systems and Flexibility Plan 2.0 with BEIS setting out our joint approach to driving a more flexible electricity system
  • Identify the highest potential sources of future flexibility and the optimal approaches to unlock them, to reduce future energy system costs
  • Support the adoption of EVs and their smart integration into energy networks to reduce dependence on fossil fuels for surface transport
  • Review the regulatory barriers for domestic flexibility to understand how we can unlock demand-side flexibility sources, including heat pumps.

Ongoing activities that support this strategic change programme

We plan to:

  • Monitor the effectiveness of the smart meter rollout so that more consumers can take advantage of their benefits and ensure they are offered a quality installation experience 
  • Implement the market-wide half-hourly settlement scheme to create incentives for suppliers to drive flexible tariffs and new services
  • Develop and implement electricity network charging reforms to promote efficiency and flexibility
  • Require and incentivise system operators at national and distribution levels to coordinate and use flexibility where it can effectively reduce balancing, ancillary and constraint management costs
  • Undertake a review of the interconnector cap and floor regime to clarify the future requirement for this policy and whether the design is fit for purpose.

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Point 6: future of retail

The energy market is likely to undergo rapid change in the coming years. The need to decarbonise heat and transport will impact how consumers use and access energy, while better access to data and new technologies will drive innovative new products and services. At the same time, post-COVID economic pressures may affect the ability of some households to pay their energy bills. And decisions will need to be taken in relation to appropriate protections for consumers, as we approach the 2023 date at which the current default tariff price cap is due to expire.

Ofgem aims to enable a future retail market that can help deliver the technological and behavioural changes needed to support decarbonisation while ensuring the interests of consumers remain protected. To inform our future of retail strategic change programme, Ofgem is conducting an internal review of the current retail market and the key drivers of change, in order to identify priority activities to include in our final forward work programme, which will be published in March 2021. Our preliminary work suggests that this strategic change programme will focus on:

  • Examining market dynamics in the light of COVID-19, seeking to identify and address any new and enduring sources of consumer harm and detriment
  • Encouraging the provision and adoption of new products and services that give consumers greater control over their energy usage and support decarbonisation
  • Ensuring that consumers get fair treatment as they adopt these new products and services
  • Considering how best to continue to protect consumers who do not actively engage in the market from excessive prices and other poor outcomes, in the context of the current default tariff price cap’s expiry.

Proposed future of retail activities in 2021/22

New activities

We propose to:

  • Review the framework for protecting consumers from risks associated with new, more complex products and services to identify if reforms are needed to ensure consumers remain protected
  • Develop options, such as collective switching to help ensure that consumers pay a fair price for gas and electricity beyond the end of the current retail tariff price cap
  • Deepen our understanding of the energy needs of energy-intensive industries and other large and non-domestic energy users to better inform our regulatory decisions
  • Establish a new heat network regime (if requested by UK and devolved government decisions) to regulate providers and protect consumers.

Ongoing activities that support this strategic change programme

We plan to:

  • Continue to play our role in the faster, more reliable switching programme to make it easier, quicker and more reliable for consumers to switch their energy supplier
  • Monitor and enforce compliance with new requirements to drive up supplier financial and customer service standards and consider further measures to mitigate the risk of costs being mutualised across the wider industry when suppliers exit the market
  • Implement reforms to improve outcomes for microbusinesses in the retail energy market and monitor their impact
  • Continue to set the default tariff price cap, modifying as necessary, and advising the government on whether conditions are in place for the default tariff price cap to be lifted, to protect retail consumers.

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Point 7: data and digitalisation

The energy system transition will continue to drive increasing complexity as the number of energy markets, assets, services and market participants proliferate, and the benefits of clear communication and data sharing grow. The smart creation, collection and use of energy system data is fundamental to managing this complexity, and for unlocking new sources of value for all energy stakeholders, including improved consumer protection.

This data and its digital infrastructure services will be able to integrate with equivalent data and services from other sectors, further enhancing opportunities for new markets, better consumer protections and coordination of economy-wide effort to deliver decarbonisation.

Ofgem is committed to using and sharing data effectively as a core component of our operations and regulatory decisions. Our data and digitalisation strategic change programme aims to ensure better regulatory decisions are taken through the improved use of data, and that data is used more effectively by the market, through modern data regulations. In particular, this strategic change programme is aiming to achieve four outcomes:

  • Improved planning and management of energy data, including regulation of data monopolies.
  • Increased data sharing, to enable new and more efficient markets.
  • Better information is received by consumers, who can take advantage of this data.
  • Improved regulatory decisions, through Ofgem making greater use and sharing of data.

Core to this programme is Ofgem’s dual roles, coordinating efforts across the energy sector and progressing government goals to modernise the use of and sharing of data. We will be working with industry and government to ensure a joined-up approach to unlocking the benefits of a digitally enabled energy sector and supporting the wider agenda of joining up data across different sectors. We will detail our ambitions and delivery plans by publishing a Digitalisation Strategy and Action Plan, jointly with the government, during 2021.

Proposed data and digitalisation activities in 2021/22

New activities

We propose to:

  • Develop data and digitalisation standards, for both relevant regulated entities and for Ofgem, including greater openness of data, addressing data quality and transparency of digitalisation strategies
  • Publish our joint Digitalisation Strategy and Action Plan with BEIS to modernise the use of and sharing of data across the energy sector
  • Conduct a holistic review to identify and understand new and existing data and digital monopolies to understand the implications for energy consumers, and to inform our future response
  • Support technical and governance services and innovations, embedding standards that ensure data is interoperable across the energy sector, other markets and across government.

Ongoing activities that support this strategic change programme

We plan to:

  • Build Ofgem’s data and digital capability and improve the insights generated from our internal data; this will advance our application of data and data science, such as for our approach to market monitoring (e.g. assuring consumer protections for complex Time of Use tariff products)
  • Improve our regulation of complex high volume data topics (such as network price controls) through better data management and use
  • Ratify and embed modern data and digitalisation standards into licences, starting with RIIO network price controls, including for their Distribution System Operator activities and to update licence requirements to improve data transparency.

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Point 8: energy system governance

As the energy system undergoes an unprecedented transition, it is right to take a fresh look at the institutional and governance structures – including Ofgem’s own role - and consider whether those structures remain fit for purpose.

To facilitate the transition to a more flexible, data-enabled, net-zero energy system, we believe there is a case for stronger strategic oversight of the energy system, and better whole systems coordination, which may require changes to existing governance procedures, codes, standards and licensing arrangements.

While we note that these questions are primarily for government, Ofgem has a role to play in contributing to the debate in our role as the independent regulator, and in delivering and/or overseeing some elements of organisational change. Examples of us exercising this role include our System Operator Review, the joint Ofgem BEIS review of the energy codes and their governance, and our Engineering Standards Review, jointly commissioned by Ofgem and BEIS.

The aims of this fifth strategic change programme are:

  • Establishing a clear view of areas for potential institutional reform, grounded in the changes we are seeing across the energy system and through our other strategic priorities such as data and flexibility
  • Considering Ofgem’s own role and responsibilities, and how we regulate, with regard to strategic priorities set out in a Strategy and Policy Statement
  • Providing a vehicle for implementing institutional changes, such as moving forward with reforms to code governance in line with the joint BEIS - Ofgem review.

Our energy system governance strategic change programme will help shape Ofgem’s role in the energy system transition, transforming Ofgem’s capabilities to become a more adaptive regulator, that can flexibly respond to a rapidly changing energy landscape, making us a regulator fit for the future.

Proposed energy system governance activities in 2021/22

New activities

We propose to:

  • Work with BEIS to review existing energy governance arrangements and identify priority areas for change
  • Consider how Ofgem can evolve to be a regulator fit for the future
  • Support the launch of any new functions and code governance structures fit for net-zero
  • Review Distribution Network Operator arrangements to ensure an effective future DSO capability, in line with our Full Chain Flexibility work.

Ongoing activities that support this strategic change programme

We plan to:

  • Conclude our System Operator review and work with BEIS on how system operation arrangements should evolve to best support the net-zero transition
  • Identify opportunities from our Engineering Standards Review to improve governance, consistency and coordination
  • Advance our Energy Code Review with BEIS to develop a more agile and responsive approach to code reform to facilitate the transition to net-zero
  • Continue to promote whole-systems coordination and cooperation across the energy system in the interest of consumers.

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Point 9: transforming Ofgem

With the support of the Authority and under the direction of our new chief executive, Ofgem has begun a significant transformation programme. Our overarching goal is to ensure we are a dynamic, inclusive and high performing organisation with a strong reputation as an employer of choice. We want to ensure we are as efficient and effective as possible, as we face the regulatory challenges of tomorrow’s energy market. 

Our transformation programme will continue to drive change internally across Ofgem, into the 2021/22 year. These internal changes will take effect at the same time as we launch our new, external-facing strategic framework. The programme includes a range of change activities that aim to further the following outcomes:

  • Uniting behind our purpose, so we are clear what we are here to achieve, and live values we can all sign up to.
  • Effective structure and governance to make better decisions, through flatter leadership, simpler governance and supporting decision-making frameworks.
  • Transforming how we work so our activities contribute to clear strategic goals, and we can use our resources efficiently and flexibly as priorities change.
  • Developing our talents so that we are an inclusive organisation that actively celebrates difference, and our people have the skills, capability and confidence to deliver.
  • Our workplace experience so our people have the equipment, tools, skills and central support they need to work collaboratively and productively.

By becoming increasingly efficient and effective in how we operate, we will be better able to deliver our strategic framework with pace and agility. An important part of this relates to providing an excellent environment for our people, for example, by supporting the retention and development of our talented workforce. This will help ensure we can best deliver good outcomes for those we serve.

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Point 10: reducing burdens

In accordance with the Regulatory Enforcement and Sanctions Act 2008, we regularly review our regulatory functions to ensure we do not impose (or allow to continue unnecessarily) undue burdens on regulated parties.

We are currently reviewing our activities from 2019/20 and considering what further burden reduction actions we can take in 2021/22.

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Point 11: estimated expenditure

Ofgem submitted a Comprehensive Spending Review bid to HM Treasury in September 2020, setting out how we proposed to support the net-zero ambitions of the UK and devolved administration governments, to facilitate investment and innovation and to reduce the cost of energy.

On 25 November 2020, HM Treasury confirmed an increase to Ofgem levy funding, accompanied by a challenging efficiencies target. This figure does not include funding for the delivery of government schemes (E-Serve) which is agreed with BEIS and has yet to be finalised.

Period

2021/22

Total expenditure

£89.7 million

In-year efficiencies required

10% - £8.97 million

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