The Prime Minister has written to the UK’s main regulators asking them to come up with ideas for reform that could boost economic growth.
Below is a letter from Energy UK outlining five areas to unlock growth through energy industry regulation.
Dear Prime Minister,
Unlocking growth through energy industry regulation
The energy sector is crucial to achieving the Government’s growth and clean power missions, delivering new jobs and opportunities for people, households and businesses across the country. The transformation of the energy industry will see over £200bn invested this decade,[1] boosting activity in construction and supply chains and ultimately offering consumers lower prices. The energy transition also presents unique opportunities for the UK to pioneer new clean technologies, giving established businesses and startups alike the chance to develop new products and services for both home and export markets.
Energy is an essential service: the balance of economic regulation and consumer protection is crucial. Rethinking the current regulatory settlement in energy is crucial if we are to truly seize the moment and achieve the Government’s missions. Energy UK welcomes the opportunity to consider how regulation can deliver economic growth, and we look forward to engaging with this process.
Energy UK represents businesses active right across the energy market. Our members regularly engage with not only the energy regulator Ofgem, but also with bodies such as the Financial Conduct Authority, Environment Agency, and the Information Commissioner’s Office. A new regulatory settlement to unlock growth and productivity in the energy market should meet five key tests:
- Clarity: the energy industry is in a state of flux, but needless uncertainty limits investment. Consulting on regulation in a deliberative, co-operative way gives industry greater confidence. In recent months, we have again seen the energy regulator proposing dramatic changes at short notice, which has an inevitable impact on business plans, resource, capacity and productivity. Consumer confidence is also dependent on clear protections. Giving people and businesses the assurances needed to fully engage in the energy transition will drive investment in low-carbon technology and support the adoption of innovative new products. Regulators can instil that confidence by simplifying the current complexity, and ensuring adequate safeguards are in place for customers in vulnerable households. Equally, protections for businesses purchasing energy should be bolstered with new regulations for brokers and other Third Party Intermediaries.
- Unlock investment: the current regulatory settlement for some parts of the energy sector actively discourages investment, which in turn limits innovation and results in poorer outcomes for customers. Reconsidering the balance of prescriptive versus principles-based rules will be crucial if we are to successfully deliver warm homes and affordable, stable bills to every household and business in the country.
- Access and operation: the costs of regulatory compliance should be minimised through great use of digital tools where appropriate, with a focus on simplified, proportionate regulation and governance. Digitising and simplifying the multiple (sometimes overlapping) interactions with regulators should also reduce barriers to entry, encouraging the competition and innovation that are vital to economic growth.
- Delivery: uncertainty and delays in both businesses and clean generation connecting to the energy grid are holding back growth. Regulators have a vital role in helping to rationalise and accelerate these connections, and their role in emerging strategic system planning will be vital.
- Efficiency: regulators have a crucial role in the planning process. As the Government has identified, unblocking planning is vital to achieving growth. Streamlining the involvement of regulators in the planning process and ensuring that regulators’ planning functions are sufficiently resourced is crucial.
In addition to proposing these broad principles for effective regulation, Energy UK will respond separately in more granular detail to the current DESNZ call for evidence about the role of the energy regulator, Ofgem.
My team and I would be delighted to discuss any of this in more detail.
Yours sincerely,
Dhara Vyas
Chief Executive
Copied to:
- The Rt Hon Ed Miliband MP
- The Rt Hon Rachel Reeves MP
- The Rt Hon Jonathan Reynolds MP
- Jonathan Brearley, CEO Ofgem
[1] Under the National Energy System Operator’s (NESO) Clean Power 2030 plans