The UK government has given energy regulator Ofgem an explicit mandate to prioritise economic growth and the clean energy transition alongside consumer protection, in the most wide-ranging review of the regulator since it was established in 2000.
The change — set out in the final report of the Department for Energy Security and Net Zero's (Desnz) Ofgem Review — replaces the regulator's single consumer-protection objective with three equal duties covering consumer protection, net zero and economic growth. The restructure would allow Ofgem to give more weight to long-term network investment when balancing trade-offs against near-term impacts on consumer bills, Desnz said.
The review was launched in December 2024 against a backdrop of criticism over Ofgem's handling of the 2021-22 energy crisis, during which 30 suppliers failed and household bills reached record highs. The UK's energy retail market has also changed substantially since 2000, with the government arguing that the current regulatory model has not kept pace.
The review sets out a clearer division of responsibilities between government, Ofgem and electricity grid operator Neso. Desnz will set out strategic objectives through a new Ofgem-specific Strategy and Policy Statement, while Ofgem determines how to deliver them. Stakeholders had raised concerns about blurred accountability across the three bodies, particularly as Neso takes on a greater role in strategic energy planning.
The regulator's enforcement toolkit will be expanded, acquiring direct consumer law enforcement powers without recourse to the courts. The review also introduces an Energy System Value Chain framework to replace the current technology-based licensing model, giving the energy minister powers to extend Ofgem's remit to new activities without primary legislation.
Ofgem's role will narrow in other respects. The regulator will not take on the delivery of new schemes on behalf of government, with energy efficiency scheme administration set to transfer to a proposed Warm Homes Agency.
Industry body Energy UK said the review fell short of what was needed. "It is disappointing that this review falls short of the radical reform that is necessary to create a more streamlined and focused regulator," chief executive Dhara Vyas said.
Most of the proposed reforms require primary legislation, for which no timeline has been confirmed.
