Publications

With references to Ofgem being “incompetent”, to criticism of its “negligence” and “systemic failure to effectively regulate”, the House of Commons BEIS’ Select Committee’s latest report[1], on Energy pricing and the future of the Energy Market doesn’t pull any punches, writes Zoe McLeod, Sustainability First's Policy Director. 

But while it’s Ofgem’s turn in the spotlight, there are important lessons to be learned, and a warning, for all regulators and governments who oversee them. Time and time again, consumers and the environment are being failed by poor monitoring, slow enforcement and weak protections with often the most vulnerable worst impacted. This benefits no-one and leaves good companies tarred by the same filthy brush.  

The cross-party Committee calls for Ofgem to improve “its regulatory oversight, its decision-making processes, the use of its enforcement powers, and the quality of its governance.” With this we agree. A number of other regulators should also follow suit.

 

Whilst there is much to support in the Draft Determinations, for example on low carbon technologies, efficiency, and consumer engagement, Sustainability First has a number of concerns that we raise in our response to this consultation, including the failure to adequately incentivise environmental performance, insufficient focus on tackling distribution losses, inaction on the potent greenhouse gas SF6, and the decision to reject company proposals for energy efficiency measures that would help customers in vulnerable situations.

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In this submission, we make high-level comments on locational pricing - in particular on the customer impacts and fairness and on scope and sequencing - before turning to specific questions Ofgem has raised. We argue that the underlying charging structures need to send the right price signals to encourage the demand side to play the invaluable role needed to achieve net zero. It is important that the consumer voice is brought into these debates, which cannot be left to technical discussions in industry dominated working groups. 

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Success in net-zero delivery, including ensuring an inclusive transition, will require Ofgem to look well beyond the scope of this narrowly framed document. In particular: any institutional arrangements at a local level aimed at addressing net zero have to look more widely than just at energy. Even in the narrower context of energy there is a need to think more broadly about potential future challenges to the energy system.

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Sharon Darcy, the Director of Sustainability First, gave this speech to the Competition Markets Authority on competition and consumer policy for a sustainable future. Her remarks were in a personal capacity because after 5 years she is stepping down as Director. In her speech she draws on her wider experience including as a former Council Member of Which?, Board member of the Solicitors Regulation Authority and Consumer Futures and Expert Panel member of the UK Regulators Network. 

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We fully support the need for a Strategic Policy Statement, and also recognise that it needs to be part of the strategic objectives which have been set for Ofwat in legislation. The SPS admirably seeks to give these steers which are, welcomely, significantly more numerous and granular than in the 2017 SPS. We outline our response to Defra’s three key questions and make suggestions for improving the SPS. But we also argue that the SPS would be greatly improved if – either within the document or elsewhere – ministers set out a strategic vision for a future water industry.

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The Ukraine crisis is a humanitarian tragedy. Without distracting from this, it also has huge cross border implications for essential services we rely on; the UK energy, water and comms sectors are all impacted. In this pack, we aim to support senior decision makers in companies, but also regulators, to be bold and make the best decisions for sustainability and the public interest during this crisis.

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It is tempting in the light of Russia’s invasion of Ukraine to think we must focus on short term energy security. But the need to address the climate crisis and ensure a fair transition to net zero have not gone away. In fact it is more urgent than ever that we stick to our net zero targets. Accelerating action on climate change is the best way to improve our energy security.

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