Ofgems role in the energy market A brief guide

 June 13, 2013

Ofgem (the Office of Gas and Electricity Markets) is the UK’s electricity and gas market regulator, which describes its key priority as ‘making a positive difference for energy consumers’.

The regulator’s responsibilities include the following:

• Issuing licences to new energy suppliers and ensuring that they are working to meet the needs of customers
• Regulating and delivering government schemes
• Helping to ensure the sustainability and security of supply for present and future generations

Here are just some of the ways in which the regulator has acted to support the interests of domestic energy users:

Investigating energy companies

Ofgem can carry out investigations on energy suppliers if it feels that they are breaching consumer protection law or breaching the terms of their licence or acting anti-competitively, and issue penalties as and when required.

As an example, the regulator has recently fined British Gas Trading Ltd and RWE npower plc for £2.5m and £2m respectively for failing to deal with customer complaints appropriately.

Increase competition

Ofgem has recently argued that it aims to "break the stranglehold of the big six energy suppliers", and increase competition in the wholesale energy market, making room for smaller suppliers to capture a greater share of the market.

Under the proposals Centrica (British Gas), E.ON, SSE, Npower, EDF and ScottishPower will have to publish the prices at which they purchase and sell electricity up to two years in advance.

Tackling energy market manipulators

Ofgem is set to receive fines to tackle those who attempt to manipulate the energy market, under the Regulation of Wholesale Energy Markets and Transparency (REMIT) which will be introduced to parliament by energy and climate change secretary Ed Davey, and must be brought into effect by the end of June.

This would see the regulator being able to issue unlimited fines and give the regulator powers toseize data and inspect premises, as part of its investigations.

This is particularly important for the heating oil market, as the European Union’s antitrust chief has argued that oil price rigging has caused “huge” damage to consumers.