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Net Zero Watch warns over change to Ofgem role

Net Zero Watch

Amendment to Ofgem’s statutory duties ‘leaves consumers defenceless in the face of green rent-seeking’

Rather than restoring Ofgem as a consumer champion, Rishi Sunak’s government is actually weakening the regulator’s ability to protect consumers against the unreasonable costs of the UK’s poorly designed and extremely expensive climate change policies. This is, quite simply, a deplorable mistake and will store up horrifying problems for future governments, to say nothing of the serious harm it will do to household wellbeing and the competitiveness of UK businesses.

As long ago as 2017, we pointed out that the regulator of the Gas and Electricity Markets (Ofgem) had been systematically transformed from a defender of the energy consumer interest into a supine part of the climate policy delivery mechanism, a point we reinformed in a more recent article (“The Decline and Fall of Britain’s Energy Regulator” 04.02.2020).

Ofgem’s original statutory duty compelled it to promote the interests of existing and future consumers through the promotion of competition. This was a clear and rational objective for a consumer champion. The revisions made in the Energy Act of 2010 redefined these interests to include the consumer interest in reducing greenhouse gas emissions. This was dubiously logical, since it is not clear that consumers qua consumers have such interests, and needless since those interests, insofar as they were real, were already represented in the arguments being made for emissions reductions policies by the relevant government departments, DECC and DEFRA at that time.

By prejudging the debate between these interests the revision to the 2010 Act in effect made it very hard for any diligent economist in Ofgem to offers substantive criticism of very high emissions reduction costs.

However, it seems that this was not sufficient for those intent on removing any obstacle to cost increases caused by climate change policy, and Government is now proposing to finish the job begun in the 2010 Act by making it explicitly committed to working towards the delivery of the Climate Change Act of 2008. To be exact, as Ofgem itself reports:

It gives Ofgem a specific net zero mandate to protect existing and future consumers’ interests by supporting “the Secretary of State’s compliance with the duties 1 and 4(1)(b) of the Climate Change Act 2008 (2050 net zero target and five-year carbon budgets)”

(“Ofgem welcomes proposed legal mandate to prioritise the UK’s 2050 net zero target”).

Reviewing the history, it is difficult to avoid the conclusion that Ofgem has been to a degree complicit and under the leadership of Mr Brearley, whose doubtful objectivity in this matter we have discussed in our 2020 article, positively enthusiastic in weakening consumer protection.

Any consumer, whether domestic or industrial, might reasonably ask “What is the point of a regulator such as Ofgem?” From government’s point of view, the point is crystal clear: the existence of a drugged and hypnotised regulator gives the false impression that the consumer interest is balanced against climate policies. The wording of the government amendment in fact shows that Mr Sunak’s colleagues couldn’t care less.