You may already be familiar with Ofgem if you’ve ever heard about the energy sector’s news, are wondering how changing rules and market adjustments will affect your gas and electricity bill, or just want to understand more about what is going on.
What is Ofgem and what does it do in the energy market in the UK?
Who Are Ofgem And What Do They Do?
What Does OFGEM Stand For?
Ofgem stands for the Office of Gas and Electricity Markets. They are the gas and electricity markets regulator in Great Britain.
The Office of Gas and Electricity (Ofgem) is a non-ministerial government department that was created in 2000 to regulate and oversee the companies that provide gas and electricity networks in the United Kingdom.
It’s comparable to Ofsted (for education), Ofcom (for broadcasting, telecommunications, and postal industries), and Ofwat (for water) as an industry watchdog and regulator.
There are more than 60 such regulatory bodies in the United Kingdom, each with its own set of rules and regulations.
The Competition and Markets Authority regulates markets; the Food Standards Agency regulates food production; and the Charity Commission is in charge of regulating charities (among other things).
Ofgem administers price controls and rules in order to protect “the interests of existing and future gas and electric consumers,” both domestic and industrial.
Ofgem achieves this by:
- promoting value for money
- promoting security of supply and sustainability
- supervising and developing markets and competition
- implementing regulation and delivering government schemes
It supports the energy business in making environmental improvements as part of its goal to serve future energy customers. It follows government initiatives and meets climate and carbon targets as part of its commitment to energy companies of the future.
By collaborating with a number of stakeholders, the National Regulatory Authority for Gas and Electricity (NRA) at Ofgem independently from government and the energy sector, as well as other stakeholders, works under an EU framework.
What powers do ofgem have?
The powers of the UK’s regulatory agency, Ofgem, allow it to monitor market activities linked with the production, transmission, and distribution of electricity as well as transportation and supply of gas.
Who Funds Ofgem?
Ofgem is not funded through taxes. The £31 million in fines it has levied on the energy sector since 2002 has not gone to Ofgem, but is instead paid directly to the Treasury. E-Serve’s expenses associated with administering environmental initiatives are covered by a variety of sources.
What Does Ofgem Mean For You?
While the majority of consumers will not have direct interaction with the regulator, Ofgem is in charge of and influencing almost every aspect of the energy sector behind the scenes. This includes everything from costs to relief programs to customer care to what you see on your bill.
In recent years, Ofgem has stepped in to ensure that the energy market is as fair and transparent to customers as possible, making it easy for them to discover information about rates and providers and compare them to pick the best energy deal, from the supplier with the greatest customer service.
In addition, Ofgem safeguards the interests of clients in a variety of other ways:
Ofgem does not handle consumer complaints about energy suppliers directly (your first stop should be the supplier or, failing that, the Ombudsman). However, as part of its market monitoring work, Ofgem keeps records on the number and type of complaints filed against suppliers.
This information is provided by Ofgem so that customers may see how suppliers perform in terms of customer service, such as which ones receive the most and fewest complaints.
You might wish to look at Ofgem’s league tables for consumer dissatisfaction before comparing energy rates to avoid companies that attract the most complaints.
In response to consumer complaints, Ofgem may issue rules on the broader market or limitations on certain suppliers.
For example, in 2019, after a lot of dissatisfied consumers complained to the Energy Ombudsman, Ofgem banned small supplier Economy Energy from adding new clients for three months.
Administering price caps:
As mandated by the government, Ofgem sets energy prices and administers price caps.
Currently, Ofgem manages two price caps: one on default and standard variable tariffs, which came into force in 2019, and another on pre-payment plans, which began in 2017.
Overseeing social and environmental schemes:
The energy regulator, Ofgem, keeps an eye on government programs like the Warm House Discount and Winter Fuel Payments to guarantee that suppliers adhere to initiatives aimed at making the energy sector more inclusive and affordable for low-income people.
It also watches over their involvement in ecologically beneficial plans such as the old Renewable Heat Incentive (now the Boiler Upgrade Scheme).
Determining what appears on energy bills:
On your energy bills, Ofgem specifies what information must be provided, including estimates for your energy usage, the name of your particular tariff, and how much you’ll spend over the next year if you maintain with the same plan (your personal forecast).
Providing a safety net after supplier failure:
The year 2018 saw the collapse of a record number of energy suppliers, leaving hundreds of thousands stranded.
When energy providers close operations, Ofgem steps in. Their safety net protects consumers’ credit balances and supply, and through Supplier of Last Resort (SoLR), they are given to a new supplier within days.
Publishing guides and energy market information:
To help the general public gain more knowledge about the energy sector and empower customers to compare energy rates and obtain better deals, Ofgem distributes information on suppliers and recommended reading.
How Effective Is Ofgem?
It’s impossible to judge the effectiveness of a market regulator. Its influence can be seen in every pound saved by consumers under price caps, as well as those who switch based on Ofgem’s information
Each discount and protection bestowed on vulnerable households, every kilogram of carbon not released into the atmosphere because a household switched to a renewable heating system under the Renewable Heat Incentive, and every minute a customer does not have to spend on an helpline attempting to dispute an invoice from a provider with poor customer service.
The fines and compensation payments it makes on the industry can be used as a measure of Ofgem’s effectiveness.
When energy companies violate their licence terms by delivering gas and electricity, engaging in anti-competitive behavior, or breaching consumer protection laws, Ofgem may investigate and financially penalize them.
Since 2010, it has fined and compensated energy suppliers more than £263 million for failing to live up to rollout deadlines for smart meters, mis-selling tariffs, ineffective customer service, and other issues that made switching providers difficult.
Energy suppliers have to pay fines, which are paid either to the government or to charities that assist energy consumers directly.
Who is Ofgem accountable to?
The government’s main energy regulatory body is Ofgem, which is an independent body accountable to Parliament and focused on the broader energy sector. It is mostly funded by consumers.
How many employees does Ofgem have?
Around 497 people work in their Glasgow office, many of whom are involved in delivering sustainable energy and environmental initiatives to customers throughout Great Britain as part of our E-Serve division.
How do you complain to Ofgem?
If you have a complaint about a network operator or an Ofgem-accredited comparison website, contact Ofgem. You can also visit the Energy Ombudsman’s website for more information. Email Ofgem or call 020 7901 7295 if you have a problem with a network provider or an accredited By Ofgem Confidence Code comparison site.
If you have a question regarding Ofgem’s rules or operations, please contact them at [email protected] with the subject “Enquiry.”
Ofgem’s telephone number is 020 7901 7295.