UK Energy Sector To Face Heavier Regulations In 2020

January 2, 2020

The UK’s energy market regulator, OFGEM, has announced recently that investor returns on income will be cut to help reduce household bills across the country. The move comes after mounting pressure for the regulator to not only help keep prices low on gas and electricity for consumers but also to help the sector meet the government’s 2050 climate targets.

Under the new rules, which are due to come into effect in the year 2023 when the next price control period begins, energy suppliers will have to make lower company returns in order to keep customer bills low, particularly as demand for electricity increases in the new decade.

OFGEM is also hoping that energy networks will deliver more power while making less.

Blind Eye To Profits

The move comes after OFGEM admitted it was turning a blind eye to companies who returned bigger profits at the end of the fiscal year by charging customers more than was necessary.

Moreover, new reports from CBI (Confederation of British Industry) suggest that the industry is not on track to meet the government’s 2050 climate targets which push for a low-carbon society and a significant decrease in all greenhouse gas emissions from the country.

The CBI accused OFGEM of not putting the climate crisis at the core of its regulatory activities and stated that it needed to adapt these in order to not undermine the UK’s green agenda, whether subconsciously or not.

These calls have also been echoed by climate activists, pressure groups and the UK’s current group dedicated to the success of these plans, the Committee on Climate Change.

Benefits All Round?

Representatives from OFGEM stated that this new regulatory plan would benefit the energy companies, as the stability and predictability of regulation changes would allow them to put means in place to continue attracting investment whilst delivering low-cost energy to the consumer, as well as helping to decarbonise the UK energy sector.

It has now promised to carefully scrutinise all company plans in the market to analyse how changes will affect consumers and the nation’s green targets.

The energy industry is not the only one to have been hit by strict price controls this week – the water industry regulator OFWAT has ordered companies to reduce consumer bills by £50 annually by the year 2025.