Ofgem: the industry regulator
Ofgem, the Office of Gas and Electricity Markets, was set up in March 2000 to replace the separate regulatory bodies for the gas and electricity industries and unify their functions. The main aims of Ofgem are promoting competition in all parts of the gas and electricity industries and regulating them. Its principal objective is to protect the interests of existing and future electricity and gas consumers. The Secretary of State for Energy Security and Net Zero has powers to establish electricity and gas price reduction schemes in Great Britain under the Energy Prices Act 2022.
Ofgem’s regulatory functions include granting licences, monitoring performance, regulating the areas where competition is not so effective (such as the monopoly on pipes and wires) and determining the strategy for the fuel industry.
The Domestic Gas and Electricity (Tariff Cap) Act 2018 introduced a price cap which came into force on 19 July 2018. The act’s primary focus is to protect consumers on default tariffs. Ofgem is required regularly to review the level of the cap and, towards the end of the initial period, to review market conditions more widely. The Energy Prices Act 2022 enables the government to reduce the prices charged by suppliers of electricity and gas, with a requirement that the benefit will be passed on to the end user – ie, the final customer.1s19 EPA 2022 Details are set out in regulations.2The Energy Bill Relief Scheme Regulations 2022 No.1100 Ofgem has the power to fine energy companies for regulatory breaches. Those requirements are principally set out in the Electricity Act 1989, Gas Act 1986 and regulated company licenses, and include rules on sales practices and complaint handling.
If an energy supply company becomes insolvent, Ofgem has authority to protect the interests of consumers facing a loss of supply. Ofgem will appoint a new supplier – known as the supplier of last resort – for the affected customers as quickly as possible to ensure minimum disruption.