Who better to explain Ofgem, and give them an introduction, than the UK government themselves, who state:
‘The Office of Gas and Electricity Markets (Ofgem) regulates the monopoly companies which run the gas and electricity networks. It takes decisions on price controls and enforcement, acting in the interests of consumers and helping the industries to achieve environmental improvements.’
They exist to determine strategy, work on various priorities and policies, and make important decisions regarding regulation, mostly relating to pricing controls, and their subsequent enforcement.
Who are they?
So, we understand a little bit about what they do, but do we know who they are? They are a non-ministerial government department and national regulatory authority. Ofgem are governed by GEMA, the Gas and Electricity Markets Authority. On this board of people, there are both executive, and non-executive members, as well as a non-executive chair. Members come from a range of backgrounds including: energy, finance, investment, consumer and social policy, science, environment, industry and economics, European concerns and much more.
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Who pays for OFGEM?
What does OFGEM do when they need to pay their bills? They collect money from the licensed companies that they regulate. Fortunately, OFGEM are independent from the energy companies, meaning there’s no favouritism or unfairness; there’s simply an annual license fee. They’re also working hard to reduce their spending by fixing certain industry issues, and hope to have achieved a 15% spending decrease by 2019.
What does OFGEM do for me?
Here are the two cases they’ve successfully completed in 2017:
- January 2017, fined British Gas £4.5 million for failing to install advanced meters before an agreed deadline.
- March 2017, fined Western Power Distribution £300,000 for making errors related to charging methodology.
These cases pale in insignificance to the £18 million that Scottish Power were fined in June 2016 for a number issues related to billing, customer service and handling complaints. As part of OFGEM’s agreement with the energy companies, part of these fines are paid to charitable organisations. Scottish Power sent one sixth of their money to National Energy Action, Energy Action Scotland and McMillan. British Gas paid their money to The Carbon Trust, and Western Power Distribution donated to The Centre for Sustainable Energy and the Energy Savings Trust.
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What does OFGEM do for charity?
When an energy company is fined for wrongdoing, some customers will be able to claim some of that money back, and others may not, while others may have switched provider. In many cases, there will be a pool of money left over from the fine; this is what is used for charitable purposes.
“By focusing on direct compensation to affected customers, we ensure, if we can, that those under investigation pay money back to those directly affected by any wrongdoing. Any unclaimed compensation is paid to suitable charitable organisations. We expect all such recipients to use the funds to deliver one or more projects to benefit energy consumers, especially vulnerable consumers.”
“Charitable projects funded through voluntary redress payments included delivering energy efficiency measures for businesses or homes of vulnerable householders, which helped reduce consumption, carbon emissions and the size of energy bills. Charities and other third sector organisations also set up programmes to advise domestic consumers and businesses on energy matters. For example, a charity targeted vulnerable consumers via both one-to-one sessions and more general campaigns to inform them about their rights and how to take control of their energy usage.”
Conclusion
What does OFGEM do? Quite a lot. They look to improve the industry standard and performance for energy customers, which is not a simple task. They are out there fining businesses, maintaining and raising standards, seeking legal action, introducing necessary regulations, and being wholly responsible not to overstep the mark in terms of their power.
