Ofgem information for energy licensees on coronavirus (COVID-19) response - 30 June update

Publication date
30th June 2020
Information types
Policy areas
1

Our priorities

Our priority is to protect consumers, especially vulnerable people, and to deliver a net-zero economy at the lowest cost. This involves ensuring consumers continue to benefit from a secure and efficient energy system.
 
We have worked quickly and cooperatively with industry in our response to coronavirus (COVID-19), including reprioritising our forward work programme in April 2020 to allow the industry to focus on their critical operations to keep consumers and staff safe.
 
We said we would update on our expectations for industry at the end of June 2020, as we move to managing the next phase of COVID-19. This page outlines these updated expectations, including our forward work programme priorities to September 2020.

 

We continue to closely monitor the impact of COVID-19 on the industry’s ability to meet its obligations and to engage with us on important regulatory reforms to protect consumers and drive forward decarbonisation. Informed by industry engagement, we have now set out our updated regulatory expectations of suppliers, networks and the electricity system operator. We will continue to be pragmatic in our response to unpredictable and changing circumstances.

We recognise that the industry is likely to need to rely on different working practices for some time. We will take this into account in our industry engagement over the coming months. We have limited our consultations to those that best protect consumers interests, sequencing them alongside other industry activities during the period. Wherever necessary, we will look to extend response time to give stakeholders time to engage.

We will continue to update this page.

Statutory obligations and prioritised activities

During the period of July to September 2020, we will prioritise work in the areas listed below. We will reassess these regularly and will update activities where needed.

Area Activities
Retail energy markets
  • Adjust the levels of the Default Tariff and Prepayment Meter energy price caps to reflect the estimated costs of supplying electricity and gas to homes in the next price cap period.
  • Complete required changes to the smart meter allowance and wholesale costs adjustment in the Default Tariff Energy Price Cap methodology. 
  • Progress work to ensure there is a suitable replacement for the current Prepayment Meter Energy Price Cap, which is due to end by the end of 2020.
  • Publish our first review into whether conditions are in place for effective competition in domestic supply contracts as set out in Section 7 of the Domestic Gas and Electricity (Tariff Cap) Act 2018, incorporating understanding of the implications of the coronavirus (COVID-19) into our analysis.
  • Complete work to review support available to vulnerable consumers, such as those using prepayment meters, to ensure prevention of self-disconnections by such consumers for financial reasons.
  • Progress changes to supplier licensing arrangements, to drive up standards of financial management and customer service of suppliers operating in the energy market.
  • Continue our support for innovators and reduce barriers to innovation further by launching an expanded innovation sandbox service and consulting on ways to improve our ability to provide relief from certain supplier obligations.
  • Progress implementing the Data Communications Company price control.
  • Progress implementing our programme enabling consumers to benefit from faster, more reliable switching.
  • Continue work to progress roll-out of smart meters across Britain’s homes and businesses.
  • Progress changes to the current energy market access and charging arrangements through consulting on key elements of the Market-wide Settlement Reform.
  • Continue retail market monitoring, including on ensuring debt management processes are fair and give careful consideration to a customer’s circumstances and ability to pay.
Wholesale energy markets
  • Enable key decisions on cross-border market arrangements.
  • Continue work on code and licence modification and responding to changes proposed by industry.
  • Publish the Capacity Markets Operational and Performance reports and consult on the Capacity Market Rules policy, giving industry additional time to respond (implementing a Capacity Market Advisory Group is delayed until further notice).
  • Continue critical wholesale market monitoring, maintaining a specific focus on market liquidity and security of supply.
  • Continue working with Interconnector developers to progress new interconnectors for GB.
Energy systems & networks
  • Work with licensees to enable urgent code modifications and develop policy interventions, as needed, to support market resilience in response to the COVID-19 pandemic. This includes developing tools to monitor wholesale market financial stability, wider adequacy and operability.
  • Further enable consumers to decarbonise their future energy use to help achieve government net zero carbon emissions targets by 2050, including use of electric vehicles, and ensure our reforms will support them in this.
  • Assessment of Balancing Costs of operating of the system during COVID-19 low demand, including future lessons.
  • Continue to review the institutional ownership and governance framework of System Operation in GB.
  • Work with BEIS and the Electricity System Operator to   identify and assess options for a co-ordinated approach to offshore transmission, and review the frameworks required to enable this. 
  • Continue work on the Electricity System Operator incentives and ongoing assessment of the ESO’s Forward Plan.
  • Look to reduce regulatory burden from the existing RIIO-1 network price controls where it is sensible to do so.
  • Continue to work towards setting our RIIO-2 network price controls starting 2021, including consulting on our draft determinations for the gas and electricity transmission network operators, gas distribution operators and the electricity system operator.
  • Continue managing the  Offshore Transmission Owner (OFTO) tenders and related activities.
  • Progressing new interconnectors in development, and related cost-assessments.
  • Progress work to implement the Targeted Charging Review, including the balancing services charges Taskforce.
  • Continue delivery of Electricity Access and Forward-looking Charging reforms.
Government environmental & social programmes
Cross-cutting
  • All obligated licensing activities.
  • Ongoing litigation, compliance and enforcement activity, ensuring appropriate timelines for relevant parties to engage. We stand ready to take appropriate urgent enforcement action, where we identify consumer harm.
  • We will continue to engage with industry code bodies and panels and seek to make timely decisions on code modifications that may impact licensees’ operations across the energy market.
  • The Modernising Energy Data programme, delivering the Energy Data Task Force recommendations.
  • Ongoing cyber security obligations
  • Engagement on the Government Clean Energy Package.
  • EU engagement on future partnership arrangements.
  • Continue support for licensees and others in coordinating measures to respond to the impact from COVID-19, including to coordinate a green recovery from COVID-19 in the energy market context to help achieve government net zero carbon emissions targets by 2050.

Stakeholder engagement

Developing our regulations through policy consultations and stakeholder engagement is central to our role in protecting consumers.  

We understand the pressures industry may continue to face in the coming months, and will continue to assess and adapt our approach to stakeholder engagement. We have limited our consultations to the most urgent, sequencing them alongside other industry activities during the period. Wherever necessary, we will consider extending response time to give stakeholders time to engage.

The table below summarises our key upcoming publications to September 2020. We will continue to update it with key dates and deadlines. Some dates may change.

Area

Activity

Key dates and deadlines

 

Retail energy markets

Consultation published 21 May 2020.

Response deadline 12 August 2020

Consultation published 17 June 2020.

Response deadline 14 September 2020.

Consultation published 25 June 2020

Response deadline 20 August 2020

Consultation published 29 June 2020

Response deadline 24 August 2020

  • Micro-business review: Policy consultation on proposals to improve operation of microbusiness market

Publication late July 2020

12-week consultation ending end-October 2020

  • Addressing barriers to retail market innovation: Policy consultation on expanding scope of derogations from supply licence conditions

Publication late July 2020

12-week consultation ending mid-October 2020

  • Price cap update: publication of updated cap levels (including updated models)

Publication 7 August 2020

 

  • Conditions for Effective Competition: publication of first review into whether conditions are in place for effective competition in domestic supply contracts

Publication 7 August 2020

Wholesale energy markets

  • Capacity Market: Capacity Market policy consultation

12 week consultation

Publication end-June 2020

  • Capacity Market: Operational and performance reports

Publication end-August 2020

Energy systems & networks

  • Governance framework for system operation review

Autumn

  • RIIO-2 price control: Draft Determinations for transmission, gas distribution and Electricity System Operator (ESO) price controls

Publication early July 2020

8-week consultation

  • RIIO-2 price control: Sector Specific Methodology Consultation for next electricity distribution price control.

Publication late July

8-week consultation

  • RIIO-2 price control: First consultation on RIIO-2 licence modifications

Publication late September 2020

4-week consultation

  • Electricity System Operator (ESO) incentives outcome: Decision to be published in July 2020

Publication late-July 2020

  • Targeted Charging review: Decisions to be published throughout Aug-Oct

Publications Aug-Oct 2020

 
  • Industry led Balancing Services Charges Taskforce which will propose reforms to balancing charges to restart in July.
Update at July Charging Futures Forum

 

  • Distribution System Operator & whole system: Next steps on key enablers for DSO work programme

Publication of position document early August 2020

Licensing, codes & standards

  • Retail Energy Code:
    • Consultation on REC v1.1
    • Consultation on licence changes
    • Consultation on REC main body, schedules and technical specification documents

Publication June 2020 ahead of formal consultation Oct-Nov 2020

    2

    Regulatory implications by sector

    The following is a non-exhaustive summary of key regulatory implications, including relating to some industry programmes.

    We expect licensees to prioritise customer and staff safety and will be pragmatic in our approach to compliance during this period. Licensees should not be afraid to do the right thing for their customers.

    Jump to:

    Retail energy markets

    Supplier obligations

    Our overarching objectives in working with suppliers throughout the coronavirus (COVID-19) pandemic are to:

    • ensure that consumer needs are met, particularly the needs of people in vulnerable situations.
    • maintain secure, reliable and safe supplies of energy to GB consumers.
    • ensure the safety and protection of consumers and the industry workforce.

    On 16 June we published a letter on our updated approach to regulating domestic and non-domestic supplier performance from 1 July 2020. This letter outlines our expectations as we enter the next phase of managing the COVID-19 pandemic. We expect suppliers to be ambitious in restoring their standards of customer service and business as usual activities as quickly as possible. We expect that customer needs are met, particularly for the most vulnerable, that suppliers maintain secure, reliable and safe supplies of energy to all customers, and that they ensure the safety and protection of customers and the workforce. We recognise this is an evolving situation, and where issues arise that are unavoidable consequences of the continuing effects of COVID-19 we will continue to take a pragmatic approach to compliance.

    16 June: Letter to suppliers

    Supplier regulatory reporting

    We expect suppliers to continue their regulatory reporting, to ensure we have a clear picture of market performance.

    We have asked suppliers to respond to a new mandatory information request to help us manage response to the pandemic.

    Recognising the circumstances, we have extended the deadlines for supplier reporting on a number of requests for information. The following will now be due in July 2020, although we expect this to include all data since the last reporting period:

    • social obligations reporting
    • complaints data reporting
    • guaranteed standards of performance reporting.    

    Smart meter programme

    On 18 June 2020, Government published its decision to extend the existing rollout obligation for six months as well as its decision on a new regulatory framework for the smart meter rollout from 1 July 2021. Energy suppliers will now be required to take all reasonable steps to roll out smart meters to all their domestic and small non-domestic customers by 30 June 2021.

    Within that, we have advised suppliers to:

    We have issued guidance outlining the minimum steps that suppliers should be taking to minimise risk of exposure during installations.

    From 1 July 2020, we expect customer needs are met, particularly for the most vulnerable people, that suppliers maintain secure, reliable and safe supplies of energy to all customers, and that they ensure the safety and protection of customers and the workforce. We will continue to take a pragmatic view of compliance, particularly in those areas where face-to-face appointments with customers are necessary, including smart meter installations.

    We recognise that the effects of COVID-19 are far-reaching and difficult to predict. We will review these expectations if circumstances change. We expect suppliers to keep this reduction in activity under active review, taking into account the latest government guidance on coronavirus (COVID-19).

    Links to Government guidelines and Industry-led commitments

    Switching programme

    On 31 March, the Switching Delivery Group decided to delay entry to User Entry Process Testing (UEPT). UEPT is the first testing stage that suppliers must complete within six months. The decision means suppliers can suspend testing preparation during this pandemic. 

    The programme is working on a revised delivery plan. We will agree the revised plan through usual programme governance so that any preparation activities that programme stakeholders can deliver is completed in the most cost-effective way.

    The programme and its representatives will ensure all programme stakeholders are kept up to date.

    Wholesale energy markets

    Energy generator obligations

    The wholesale energy market continues to play a key role in delivering secure supplies of energy for consumers during this difficult time. We will continue to monitor the impact of COVID-19 with our colleagues at BEIS.

    REMIT compliance

    REMIT is an EU regulation on energy market integrity and transparency (No 1227/2011). 

    We take any breach of REMIT prohibitions and obligations seriously. We would view any attempt to take advantage of a national emergency as a significant aggravating factor.

    Following Government advice on coronavirus (COVID-19) measures, we understand that many market participants will have implemented working from home arrangements. REMIT continues to apply regardless of working arrangements.

    In the case where working from home arrangements impose technical limitations on trading supervision and the broader control environment, we expect market participants to consider what steps they could take to mitigate outstanding risks. This could include, for example:

    • enhanced monitoring, or
    • retrospective review once the situation has been resolved. 

    If market participants have concerns about REMIT compliance during this time, they should contact us at REMIT@ofgem.gov.uk.

    Where any issues are due to the coronavirus (COVID-19) situation, we will take this fully into account.

    We continue to review the situation and monitor for market abuse. We will take action where necessary. 

    Energy systems & networks

    Network company obligations (transmission and distribution)

    Our overarching objectives in working with network companies throughout the coronavirus (COVID-19) pandemic are to:

    • ensure that consumer needs are met, particularly the needs of people in vulnerable situations.
    • maintain secure, reliable and safe supplies of energy to GB consumers in the short to medium-term (i.e. through to the end of next winter).
    • ensure the safety and protection of consumers and industry workforce.

    On 16 June 2020, we updated our approach to regulatory arrangements for network utilities from 1 July 2020.

    From 1 July 2020, we expect network companies to comply with all of their regulatory obligations. The only exceptions to this approach will be where works and services cannot be delivered to the required standards because of the need for the network companies, their supply chain, or their customers to comply with Government COVID-19 related guidance to keep customers and staff safe.

    We recognise that the effects of COVID-19 are far-reaching and difficult to predict. We will review these expectations if circumstances change, and continue to be pragmatic in our approach.

    16 June: Letter to network utilities

    System operator obligations

    We expect system operators:

    • to be ensuring the secure and reliable operation of the electricity and gas systems as their first priority, and
    • to continue to deliver their critical core functions in line with their licence, and
    • in the case of the Electricity System Operator (ESO), deliver its Forward Plan.

    On 30 June 2020, the immediate-term approach we set out in the enabling framework will end. It will be replaced with new arrangements to facilitate a progressive return to a more normal set of operating arrangements. The ESO will be expected to meet all of its licence obligations from 1 July. The only exceptions to this approach will be where works and services cannot be delivered to the required standards because of the need for the ESO, their supply chain, or their customers to comply with Government COVID-19 related guidance to keep customers and staff safe.

    View our open letter on regulatory expectations of the electricity system operator.

    RIIO-1 network price controls

    We have taken steps to reduce the regulatory burden from operating a range of RIIO-1 network price control processes this year, including the annual network company reporting requirements.

    View a summary of amendments to the RIIO-1 programme for 2020.

    RIIO-2 network price controls

    For RIIO-2, our plan remains to publish final determinations by the end of 2020, and for the new controls to begin from 1 April 2021.  

    We propose to continue working towards publishing a consultation on our draft determinations for the transmission and gas distribution sectors and Electricity System Operator (ESO) controls on 9 July 2020, followed by a consultation on the electricity distribution sector methodology (RIIO-ED2) in late July 2020.

    Given social distancing guidelines, we are not holding public open hearings ahead of the RIIO-2 draft determinations. We will continue to hold bilateral and working group meetings as normal, using teleconference or video conference facilities.  

    Following publication of our draft determinations we will be holding a number of webinars to discuss sector specific outputs for transmission and gas distribution, as well as net zero and finance. During this time, we will also be attending a number of working groups and online events.

    We welcome contact from stakeholders if they want to discuss any issues raised in the Challenge Group reportsIndependent Customer Engagement Groups/User Group report or in the wider call for evidence responses published in January and February this year.

    We will keep the RIIO-2 programme under regular review and have contingency plans should a worsening of impacts from the pandemic make it unfeasible to deliver the existing RIIO-2 programme by 1 April 2021.

    Government environmental & social programmes

    Information on delivery of Government environmental and social programmes

    Where licensees are obligated under the government schemes we deliver, we expect that they will look to meet their obligations. This includes ensuring that they will be able to meet any Feed-in Tariff and Renewables Obligation payments.

    We continue to deliver our statutory functions in administering Government environmental and social programmes. We are prioritising areas which have the most impact on participants, such as scheme payments and enquiries, but are unable to pause work or adjust deadlines laid out in the Regulations. 

    All work carried out under the programmes:

    In addition, please note the following scheme specific advice:

    • Energy Company Obligation (ECO) work should be carried out in-line with the latest Government advice and devolved administrations where relevant. We have also published more information relating to ECO amidst COVID-19
    • We expect technical monitoring to continue under ECO. In the ECO amidst COVID-19 publication we have provided an alternative option to onsite monitoring that makes use of remote inspections. It is imperative that industry continues to maintain standards of installation and that customer protection remains at the forefront of the installation process. We see monitoring as integral to achieving this. Suppliers concerned that they will not be able to meet monitoring requirements should contact us at eco@ofgem.gov.uk as soon as they can.
    • Feed-in Tariff (FIT) biennial meter verifications (BMV) should only take place where they can be completed in accordance with current Government guidelines on going to work and social distancing. Our FIT Compliance team has written to all FIT licensees on temporary arrangements for BMV to ensure that eligible FIT generators continue to receive FIT payments to which they are entitled whilst restrictions are in place. The team will continue to update FIT licensees as the situation progresses.

    Links to Government guidelines and Industry-led commitments

    Cross-cutting activities

    Market entry and innovation support services

    We will continue to operate the Ofgem Innovation Link service, offering support on energy regulation to businesses looking to launch new products, services or business models. But, recognising the circumstances, we may take longer than usual to respond to requests for feedback.

    Modernising Energy Data (MED) programme

    We will continue to collaborate with the Department for Business, Energy and Industrial Strategy (BEIS) and Innovate UK to facilitate delivery of the Energy Data Task Force strategy for a modern digitalised energy system. We will ensure the marketplace adopts a coordinated approach to digitalisation and associated data-driven services. Specifically, we will work with network companies to ,support them as they make improvements to their digitalisation strategies and we will provide greater clarity about our minded position for regulatory rules relating to digitalisation and the use of energy data.

    Page history

    • First published: 30 June 2020
    • Last updated: 30 June 2020