Ofgem Annual Report and Accounts 2021-22

Reports, plans and updates

Publication date

(For the period 1 April 2021 to 31 March 2022)


Chair’s foreword - Martin Cave

The changes we have seen in gas prices are a once-in-a-generation event. We at Ofgem know from our frequent contacts with consumers what a tough situation this creates for them, especially for vulnerable households, where we are already seeing worrying evidence of self-rationing of energy. This presents formidable challenges to support customers which government, Ofgem and the energy sector have had to step up to meet, both at pace and scale.

On behalf of the Ofgem Board, as well as personally, I would like to pay tribute to the frontline staff in the sector who are doing their best to help customers every day, and making a difference in very difficult circumstances.

For its part, Ofgem has done all we can to ensure that customers are treated fairly and pay no more than a fair price for their energy, chiefly through our robust licencing regime, credible deterrence mechanisms, and price controls.

As is good practice in corporate governance, we received early in the year an independent Board Effectiveness Review. While this highlighted much that works well in our current governance, it has also underlined some areas for improvement, which we have been making over the last year.

In January, we commissioned an independent review into the root causes of the recent supplier failures and how regulation played a part, and have a full action plan to implement its recommendations, many of which are already in train.

In addition to overseeing the organisation’s response to the crisis, the Board is also very aware of the importance of a robust strategy to support Ofgem in delivering an affordable, reliable, and low carbon energy system for the future that delivers the transition to net zero at the lowest cost in the interests of consumers.

Against this challenging backdrop, we have focussed on our five strategic programmes where we believe can have the greatest impact in enabling the net zero transition in the interests of energy consumers, and two enduring priorities to protect consumers and play our part in delivering renewable electricity, heat, energy efficiency, and social schemes.

In support of this the Ofgem Board, through its People and Remuneration Committee, has continued to plan an active role in the ongoing organisational transformation, including our commitment to achieving 50% women and 9% BAME women across our senior management and senior leadership positions by 2025, as well as in the strengthening of its governance, compliance and risk management through its Audit and Risk Assurance Committee.

I am delighted that the Board has recently been able to resume face-to-face engagement with stakeholders around Great Britain, in addition to important meetings with the UK and devolved governments, and I look forward to continuing these discussions over the year ahead.

I would also like to thank Paul Grout, who stepped down from the Board this year. His contribution over almost a decade of service, and in chairing the Board’s RIIO Committee, has been invaluable and we wish him well for the future.

As we look forward, we will continue to support consumers through this challenging time – and to seize the opportunities in the crucial year ahead.

Working closely with government and industry, I look forward to continuing Ofgem important work to protect consumers in a difficult market, shape a modern energy system that is cleaner and more responsive to changing demand, and deliver a secure supply of electricity and gas at the least cost to consumers.

Martin Cave


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Chief Executive Officer’s Report - Jonathan Brearley

In a difficult year, and with complex trade offs to make, Ofgem has been doing everything in our power to support customers.

I am acutely aware of what a challenging time this has been for colleagues across Ofgem, the energy sector, and the consumers we serve. I talk to customers on a regular basis, and I know how tough rising energy prices are for many households and businesses who are also facing other big financial pressures.

Ofgem has always needed to make complex trade offs on behalf of consumers and will need to continue to get the balance right between different consumer needs. For example, between current and future consumers, different income groups and different geographic areas. This has always been the case, but the scale and pace of decision making has needed to significantly increase as we have responded to the crisis this year. Given the energy market continues to face big challenges, we expect this to continue and will adapt our work to respond.

Protecting consumers

Our job as the energy regulator is to do everything we can to protect customers. In this crisis, this has meant changing a significant part of our planned 2021/22 Forward Work Programme activities, and I would like to thank the industry, government, NGOs, and Ofgem staff for the hard work they are doing to support people.

Our Default Tariff Price Cap has protected 23 million households, while our supplier exit processes ensured that more than four million consumers were transferred to a new supplier with their credit balances, and no disruption to their energy supply, when their existing supplier exited the market.

We also recognise that there are lessons that need to be learnt, and we continue to work at pace to strengthen Ofgem’s regulatory regime to tighten financial regulation in the retail market, reform of the price cap to make it more adaptable, and enhance supervision of energy suppliers to ensure they are fulfilling their licence obligations.

Now more than ever, we expect customer service standards to be maintained and customer to be treated fairly, and ensure companies are held to higher standards for overall performance on customer service.

In October we set out further actions to move the retail market to a position that is more resilient, protects consumers’ interests, and is better able to adapt to a changing wholesale market.

We have also launched a series of rigorous compliance reviews, starting with a thorough assessment as to whether customer Direct Debits are being set appropriately, with other reviews to follow to assess other aspects of vulnerability, affordability and customer service.

Delivering Net Zero

This gas crisis and Russia’s invasion of Ukraine has changed the economic fundamentals of the energy sector. Many forms of low carbon generation had already become cheaper than conventional generation, but with the volatility we now see in gas prices, the economic case is far stronger.

This underlines the importance of transitioning to generating cheaper, cleaner power here at home. Delivering this change reliably and securely at the least cost to customers remains a key priority for Ofgem, and we will continue to work with the industry, government, and NGOs, to make the changes to the market needed to deliver this transition at pace and in customers' interests.

This will require rethinking how we plan, operate, and have the right regulation and structures in place to deliver a smarter, more strategic system. We have continued to develop our settlement with electricity distribution network companies, RIIO ED2, aimed at improving customer service and resilience to prevent power outages, such as those seen last winter, delivering a major expansion of our transmission network to get energy where it is needed, and preparing the way for increases in the generation of cheaper, greener, home-grown energy to bring down bills in the long-term.

We are also working to make power supplies more resilient to more frequent storms, including taking lessons from the response to Storm Arwen.

In partnership with Innovate UK, Ofgem is playing an active role in fostering the new technologies and breakthroughs needed through our flagship Strategic Innovation Fund, making £450 million of resources available to address four major strategic challenges, including whole system - or ‘plant to plug’ - integration, data and digitalisation, heat, and transport.

Transforming Ofgem

Meeting the formidable challenges ahead also means Ofgem itself has to change.

That is why we are continuing to deliver an ambitious internal transformation plan, including by continuing our efforts to become more representative of the consumers we serve. We have recruited a dedicated Diversity and Inclusion team to drive this forward and will publish a new D&I strategy in the coming months.

We have also continued to make progress in strengthening Ofgem’s own governance, compliance and assurance work. There is further work to be done to mature and embed this, particularly in risk management, and we will continue to strengthen this over the course of the year ahead.

The look ahead

Looking ahead, we are launching Net Zero Britain, our thinking on the energy reforms that we think need to be made by 2030 to ensure the power sector is both resilient and delivers a net zero power sector by 2035 at the lowest cost to consumers, looking at system management, improving consumer protection and participation, and ways to make the system more efficient. 

This includes rolling out market-wide half-hourly settlement to enable a smarter, more flexible grid, giving consumers more control and enabling them to draw energy from the grid at cheaper rates when demand is low.

A smarter, more strategic system that can shift demand will reduce the need for costly new generating and grid capacity, saving customers up to 10 billion a year in the long term, helping keep costs down and achieving our climate change goals at the same time.

This will require a fundamentally different system for our demand and supply of energy - and we will work closely with the government on its comprehensive Review of Electricity Market Arrangements (REMA).

We are pleased the UK Government has accepted our recommendation to establish an independent Future System Operator (FSO), to oversee the network at a national level, and we have launched a review into arrangements that may be needed at a local level to drive local ownership and accountability.

We are also likely to need wider changes to our wholesale electricity market to reflect different local conditions, alongside a different way of regulating our retail market, and we will come forward with further thinking on this in the coming months.

Finally, in light of the events in the energy market over the last year and in recognition of the challenges many households face, the Executive Committee (ExCo) has voluntarily decided to donate any performance-related bonuses they may receive for 2021-22 to a charity supporting vulnerable energy consumers.

In a difficult year, Ofgem has been doing everything in our power to support customers, and I look forward to continue working with government, industry and other stakeholders to deliver a more diverse, cheaper, and low carbon energy system that protects and works for consumers.

Jonathan Brearley

Chief Executive

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