Jonathan Brearley speech to the Future of Utilities conference

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Ofgem Chief Executive Jonathan Brearley's speech to the Future of Utilities conference delivered on Wednesday 11 June 2025.

Introduction

Thanks very much and just to say it’s lovely to be here. I am one of those people who have come back to this conference – in fact, I remember the time I came here as CEO in September 2021.

For anyone who has been watching energy over the last few years, that is the very start of the gas crisis that we have been going through.

At the time, as a regulator, we were focused principally on making sure customers were protected as we saw all that turbulence in the retail sector. 

And I stood here and I talked about the set of reforms we needed to make to the retail sector, to manage those risks better in the future.

And look, I am really proud to stand here today to say that the industry has emerged from that crisis.

Though we have seen dramatic changes in the way the market operates, and dramatic changes in the prices customers face, we have all worked really hard to protect customers as best we can. And, genuinely, those reforms which I laid out are on their way to being fully implemented and we do see a much more stable retail market – accepting that there is a long way to go to get to a perfect regulatory model, and indeed a perfect operational model, for the UK energy retail market for the future.

So I’m very proud of that. But equally, during the crisis, I spoke to a number of customers about how they felt. Now at times, publicly I was announcing price rises that could have gone up to £3,500 to £4,000. And even though the government put in around £50 billion of support, we still saw customers’ bills double.

And I spoke to many people who talked about their experience of how that felt for them. I talked to people who would rather be in hospital than at home, because hospital was warm. I spoke to people who honestly were making choices between their food, their children’s food and the warmth they needed for their home. 

So I don’t want us to forget where we’ve come from. The truth is I’m very proud of the work we’ve done but there is one underlying reason why we were in that situation, and that is this country’s reliance on an international gas market that we simply don’t control. 

Ofgem doesn’t control it, the British government, doesn’t control it – indeed the European Union doesn’t control that market.

When I stand here today, what I really want to talk about is how we move to make that change away from the dependency we have on gas today.

Under the vision that Ed Miliband has set out to get to 2030, the principle benefit we see is that we will get to a more stable energy system for customers, and avoid the sorts of price spikes that we’ve seen in the past.

And this year is vital. This year is the year we move from all those plans, all those conversations, all those seminars, all those reports, to investment and action on the ground.

So I was really pleased to see the announcement around Sizewell yesterday. Clearly nuclear will be a big part of our future energy infrastructure. But there is a lot more that we need to do.  

So basically, I want to talk about three things today:

  • first of all, the need to make those investment, and the upcoming decisions that we have that will put that investment in place
  • secondly, to open up the question of how we are going to manage the costs of the transition in the best interests of all consumers – especially in a world where fixed costs will rise and variable costs might fall
  • and thirdly, how we mitigate the risks of the transition for consumers, particularly the most vulnerable, so the overall impact on bills is as low as possible – and I will talk about what we need from you, across the whole energy ecosystem to make that happen

The case for investment

So let me start with the case for investment. And first I must say is that of course I welcome recent reduction in the price cap, which will see bills fall by around 7% for an average household, primarily driven by a reduction in wholesale gas prices. 

However, the fact remains that prices remain elevated – we are 10% above what we were last year – and they remain very volatile.

If we look at the pattern of pricing over the last year, every 3 months we have seen quite significant jumps up or down that customers have had to manage.

So even with that fall in the price cap, we are still seeing relatively high prices and a volatile world for customers to manage.

If you are on a prepayment meter, if you are someone genuinely struggling to manage your bills day to day, this kind of quarterly change in your outlook is extremely difficult for you to manage.

So in my view, regardless of whether the price cap has moved up or down in any particular quarter, the case for getting off of this roller coaster – the case for changing our energy system for good - remains as strong as ever.

Now we need to secure the investment necessary to diversify our energy mix, and to reach clean power. This is the only credible way of reducing consumers’ vulnerability to volatile gas prices, and stabilise bills things in the medium term.

This will do a number of things. It will increase our energy security and resilience. It will reduce our dependence on gas prices, and create a system that will allow us to avoid a repeat of the impacts of the energy crisis that we faced a few years ago. 

RIIO3

So this is why Ofgem is committed to supporting the energy transition: maintaining safe and secure electricity and gas supplies at transmission and distribution level, while driving a fair transition for consumers at the lowest possible cost.

Now our part of that principally is around how we regulate the networks.

Later in June we will issue our draft settlement for the first tranche of network price controls. 

For those in the detail, that’s the transition system – the big wires – the gas transmission system – the big pipes – and then the local system, the gas distribution networks.

This does mean we need to enable tens of billions of pounds both to maintain and enhance our networks, to make sure they stay safe and secure, and also to make the transition that we need to make to get to that new energy system.

Now putting that investment in place will be paid back over many years. But it is clear, with that scale of investment, it is highly likely that network charges will need to rise.

However, what this gives us is that safety, that security, and principally that is the assurance that customers will have against hundreds if not thousands of pounds of price increases, particularly given the history we have seen over the last few years. 

And it will also reduce constraint costs, where right now we have little choice but to pay wind, solar farms, and indeed gas plants to switch off when the grid is overloaded. 

And to be clear to network companies, we are paying you a vast amount of money and we want to work closely with you to support you in delivery. Customers are reliant on all of us – you will need to deliver on time and on budget.

This is a big investment by customers, and indeed a big undertaking by all of us to build this new system we all need to deliver.

So therefore, while we accept the case for new investment, accepting that it is very much needed, we will be fully focussed on the need for excellent service, value for money, and efficiency from the network companies that that funding goes to.

This means maintaining control on costs, having sharp targets on efficiency, and strong incentives and accountabilities for delivery on time and on budget.

And of course if companies fall short of this, we will need to act. 

We will set out our thinking on this in more detail in our draft determinations later this month, covering the electricity transmission, gas transmission and distribution, as I mentioned.

This will set an initial level of the level of investment across the gas and electricity sector over the next 5 years and the benefits that is expected to deliver for consumers.

But equally it will provide those sharp incentives for performance and delivering on new infrastructure for consumers– particularly to make sure that we keep our promises and we deliver on that return on investment that is so vital for British customers in the future.

So there is a huge investment that we need to make, and as I’ve said, network costs may need to rise, and overall when you think about the contribution of renewables as well, the fixed costs are going up as variable costs go down.

Rising fixed costs

So let me turn to the second point: how we manage the costs of this transition.

As I’ve said, over the next few years, we do expect fixed costs to rise, and I know that that raises concerns.

We know that there have been concerns about how fixed costs are distributed, particularly as they relate to standing charges. 

And we have heard loud and clear, in one of the most popular consultations in our history, that many people don’t like standing charges and the way they are currently charged on bills.

So we have already set out some proposals for zero standing charge tariffs under the energy price cap, and we are examining those closely, giving consumers a wider range of options to choose from to see what is right for them.

However, this approach does not tackle that underlying cost of the system facing suppliers. With fixed costs continuing to rise in the future, we need a more enduring and strategic approach to standing charges and affordability: principally about how we allocate those fixed costs in the fairest possible way.

We want to make sure that the right incentives are in place for customers; we want to make sure that these fixed costs are allocated fairly, including ensuring that those who are on the lowest incomes, those that are struggling most, are able to adapt to the system that we have.

So we may need to rethink how we charge those costs, how bills are set up, how those bills reflect the costs in our system.

That is why we are looking at how we best allocate costs, including the incentives they put on customers. 

So we will be releasing soon a call for input, that will reflect some of these trade offs and choices involved – raising the question not only of what the costs will be, where they will fall in the system, but how they should be allocated and how they will fall in bills.

And we will also be raising the question of whether a lower burden should be placed on those who will struggle the most, principally those on lower incomes.

So in a sense, we have to think hard about the investment, putting the investment in place – the case for that I think is unequivocal – but equally we need to think about how we best manage that transition for customers out there. 

Managing the risks of the transition

So I would now like to turn to my third point: how we manage the wider risks of the transition, and really what we need from the sector. 

Spending tens of billions of pounds of customer’s money with the Transmission Operators and the Distribution Network Operators does mean keeping a laser focus on how we manage our delivery effectively, and ensuring things are delivered as quickly as possible.

We have worked with them closely – we want a collaborative relationship and I believe that we have one – but all of us need to be in no doubt that in a sense we are representing the customer, and we want to make sure that we get things on budget and on time.

We only have five years the government’s 2030 Clean Power goal, the timetable is crucial, and the margin for error is minimal. 

So we have reformed our regulation to greatly increase the pace of investment, and are working with government to maximise the opportunities this presents.

We have set up a programme known as the Accelerated Strategic Transmission Investment scheme, or ASTI – which has received positive feedback from across the sector and from investors – outside the steady state of our price controls. The aim of this is to make sure that we can get that funding in place when we need it. 

This has allowed major projects to be identified, for us to approve them in record time, and thus allows the transmission operators to make the long term commitments to the supply chain more quickly. 

We also know we are in global competition for resources. We know that supply chains are competitive, and supply chains are tight.

That is why we have also introduced an Advanced Procurement Mechanism: to allow services and goods to be identified well in advance, and ordered well in advance, to maximise the British ability to influence that supply chain.

Now I believe if we accelerate that investment, if we maximise British buying power, not only should we deliver for British customers, we can deliver for the British economy. 

So I am keen that Ofgem, the network companies and government work together, not only to secure this supply chain but to get some of this supply chain develop here.

So we need to deliver, we all need to make sure that the network gets put in place, and we need to work with government to make sure we are not just thinking about what we do, but how we can help wider economic growth as a result of the investment that we make.

That is the network we will build for the future – but we have a major problem that every industrial customer talks to me about, that every generator talks to me about, and that is connections. 

So we have worked very closely with NESO to reform the connections queue, to make sure that we separate those projects that are needed for 2030 from the others, and to prioritise those. And I am really pleased to say that we have made good progress, and we have a plan to make sure that we enact the various decisions that were made by NESO and Ofgem over the next six months or so. 

Now, these things are controversial – they are always best talked about in theory than in practice. But I need to be clear about two things.

Firstly, Ofgem is absolutely determined to see these reforms through – we know it is vital for a functioning system, but equally as government themselves have said, they will legislate if we can’t get these proposals through.

Conclusion

So look, there’s a huge amount we need to do – a huge amount I haven’t touched on – I haven’t mentioned the words ‘zonal pricing’ but you know that debate is out there up and running. There is an awful lot we need to do to get to the system we want to have. But I’ll just end where I started.

Having stood here at the start of the gas crisis, having seen what happened to our country, and what happened to our customers as a result of the changes we have seen, we all have a duty to put this investment in place, to take the British energy system to a place where it is more stable, better able to manage its risks, and yes, better able to look after its customers. Thank you.