In a week that saw the Labour party declare war on Ofgem, we ask what’s the point of our energy regulator?
Caroline Flint, the shadow energy secretary, announced at the Labour party conference that her party would scrap the energy regulator, Ofgem.
She said: “The time has come to say goodbye to Ofgem,”, and claimed that Labour could cut energy bills without the regulator.
So what does Ofgem actually do and would the UK be better off without it?
What do they actually do?
Ofgem was set up to protect customers by promoting competition and cracking down on any energy firms monopolising the market.
The aim was to protect energy customers from large energy bill increases (no, really) and the country as a whole should have high levels of energy security.
Ofgem is also expected to make sure the needs of vulnerable customers are met, and that energy companies are working towards a more sustainable future.
They set price controls, stating how much energy firms are allowed to increase their bills by, as well as setting and regulating energy policy, and monitor the relationship between the cost of wholesale gas and electricity and the prices being charged for it.
Can they control energy prices?
No, Ofgem cannot set energy prices, and has sometimes been characterised as ineffectual due to a lack of power in this matter.
It enforces rules when they have been broken and is currently trying to simplify the energy market, encouraging companies to have less complicated tariffs and more transparent policies.
Ofgem can seek redress on behalf of the consumer if a company breaches the terms of its licence, acts anti-competitively or breaches consumer protection law.
Since the regulator is designed to make sure that consumers are put first, many people see its primary role as ensuring energy bills do not undergo steep increases.
In reality it has little power to do this and earlier this year said that upgrading gas and electricity networks will heap extra costs on customers. This is before the energy companies themselves increase bills due to what they see as a need within the market.
The case for Ofgem is fairly straightforward:
- Its only focus is the energy market
- Designed to put customers first
- Promotes competition
- Encouraging companies to simplify tariffs and make it easier to identify which is cheapest
- Aiming to increase transparency
- Enforces rules and seeks redress when companies flout regulations
- Collects data on consumer complaints and take action if appropriate
- Monitors energy bills
Not to be
Sadly there are equally complelling reasons to scrap the regulator:
- Has failed to get tough on energy companies
- Has not simplified the energy market enough
- Does not deal with individual consumer complaints
- Does not have the power to bring prices down
- Labour has suggested American style co-operatives could do a better job, or another regulator in its place
- Poor consumer opinion of energy firms reflects badly on regulator
So what do you think? Is it time to swing the axe?