What is Ofgem and what do they do? Find out everything you need to know about the government energy regulator, and what they can do for your business...
Since energy prices started going haywire in 2022, you’ll have been hearing a lot about Ofgem, but who are they, what do they do, and why should this matter to you? For all the privatisation of the energy sector which took place decades ago, energy remains a tightly regulated industry, and Ofgem is the government regulator responsible for ensuring that the needs of the business, the market and consumers are fairly and equitably balanced.
Ofgem is a contraction of “The Office of Gas & Electricity Markets”. They were founded in 2000 as a merger of the Office of Electricity Regulation (OFFER) and Office of Gas Supply (Ofgas).
Ofgem have three primary duties; to ensure that customers, whether they are domestic or non-domestic, are treated fairly, to help the country switch to a greener economy, and to enable innovation and competition in the energy market.
Ofgem matters to businesses for several different reasons. Critically, any of the protections that they offer to domestic energy users apply equally to businesses, but it is their rules surrounding micro businesses which will be of particular interest to business owners since the vast majority of businesses in this country fall under that banner, and they have added protections which don’t apply to larger companies.
Ofgem has many powers at its disposal to ensure that it can properly regulate the market. Among these powers are monitoring supplier compliance through consumer research and other methods, investigating companies that have potentially breached or failed to comply with legislation, and issuing financial penalties if an energy company has breached legislation. Ensuring fair competition and consumer protection is at the top of their list of priorities. One of the most visible ways in which they do so is through the energy price cap, which ensures that prices for people on default energy tariffs are fair and that they reflect the cost of energy. This cap is updated every three months to reflect changes in underlying costs as well as inflation.
Ofgem also takes an active role in promoting sustainable energy practices through monitoring and updating industry codes, conducting strategic reviews, and making, implementing and enforcing regulatory proposals. Since they issue licences to energy suppliers, it is within their scope to investigate companies that have potentially breached or failed to comply with legislation and issue financial penalties if they have done so. It should also be added that they don’t create energy policy in this country–that is the responsibility of the government Department for Business, Energy and Industrial Strategy (BEIS)–though they do highlight areas of government policy which may need to be addressed.
Ofgem’s governing body is the Gas and Electricity Markets Authority, which is usually referred to as GEMA, the Authority, or the Ofgem Board. They have an executive committee led by chief executive Jonathan Brearley, who has previously led electricity market reforms as the Director for Energy Markets and Networks at the government’s Department for Energy and Climate Change, and interim Chief Operating Officer Richard Smith, whose previous experience includes leading the creation of the first UK-wide Future Energy Scenarios energy system, promoting political, regulatory and industry-wide stakeholder engagement. Their ExCo is made up of many people who are highly experienced within the energy sector.
Disputes between customers and suppliers can happen, and under such circumstances, it’s not uncommon for them to be passed to the Energy Ombudsman to be resolved. Ofgem appointed The Ombudsman Service in 2015. The Ombudsman Services plays an important role in ensuring good consumer outcomes and trust in the energy market by investigating disputes between consumers and energy suppliers when consumers remain dissatisfied with the way their energy company has handled their dispute. In accordance with Ofgem’s role as the Competent Authority, every two years they are responsible for assessing whether the Ombudsman Services still meets the approval criteria under which it was appointed.
The Ombudsman primarily deals with complaints received within 12 months of the supplier giving a customer their decision over a complaint. If a supplier hasn't given a decision that period can be stretched, but it's recommended that complaints are made as promptly as possible. Formal complaints should always be made to the supplier first to allow them to resolve any dispute before the matter is escalated, or if a dispute raised hasn’t been resolved within eight weeks of it having been raised. The Ombudsman can make suppliers fix problems, apologise or explain what went wrong in the case of a dispute, and in some cases pay compensation. Suppliers must carry out the actions listed in the Energy Ombudsman’s decision.
Ofgem’s regulatory powers are far broader than this. They actively monitor supplier compliance with their rules, using several sources of intelligence to help them to do this effectively, and can carry out even fuller investigations into the activities of businesses they believe may have breached one or more conditions of their licence or other relevant requirements.
They can impose financial penalties of up to 10% of a regulated person’s turnover, make consumer redress orders and issue provisional/final orders, where appropriate, for breaches of relevant licence conditions and other relevant requirements (as well as certain other provisions) under the Gas Act 1986 and the Electricity Act 1989.
Their provisions regarding micro businesses are particularly relevant to business owners, since among the added protections that this type of business is afforded are protection tinder back-billing rules (which state that consumers should not be charged for any unpaid energy use more than 12 months ago if they have not had an accurate bill or statement of account for this before), and that micro businesses wishing to terminate “roll-over” contracts can do so without being required to give any form of notice to terminate, facing a termination fee, or being liable to increased standing charges.
A good example of how Ofgem can flex its muscle in this regard came earlier this year when three domestic energy suppliers had to pay a total of £8m for delaying or failing to make statutory compensation payments owed to energy customers. E.On Next, Good Energy and Octopus Energy either missed or unduly delayed the compensation payments, which are due if a supplier does not provide a final bill within six weeks when a customer switches to another provider.
Since 2010, Ofgem has imposed more than £263m of fines and redress payments on energy suppliers, including penalties for failing to meet deadlines for the rollout of advanced energy meters, for the mis-selling of tariffs, for poor handling of billing and customer complaints, and for practices that made switching to a new energy supplier difficult.
It is extremely important that should you have an issue with an energy supplier, the matter is raised as a complaint with Ofgem. While they have sophisticated monitoring tools for assessing the activities of these companies, reporting allows them to determine trends of behaviour and better regulate the sector as a whole. Ofgem has a four-step process for complaint management:
1. Contact your energy company directly. Locate your account details and their contact details first. The phone number and the website details for your energy company will be on your bill.
2. Talk to them. Tell them the problem and what you’d like them to do to resolve it. Your energy supplier must try to fix the problem within eight weeks. Make a note of the date you first contacted them in case you need to check this later on.
3. Get support. The Citizens Advice consumer network can help you with this by explaining your legal rights and obligations in clear and easy-to-understand terms.
4. Take it further. The Ombudsman can take your complaint further if you’ve had no response or an unsatisfactory one (commonly referred to as being at “deadlock”) within eight weeks of the complaint being opened.
The consumer magazine Which? surveyed more than 10,000 people in October 2022. They found that 4% had raised a formal complaint and that the most common gripe tended to switch from the original complaint itself to how the complaint was handled by the supplier.
They found that the most common reasons for complaints being opened in the first place were problems with bills (45%), pricing/cost of energy (29%), meter accuracy (4%), managing payments (17%), problems with direct debits and/or credit balances (17%), and problems with the installation or removal of meters (15%).
Ofgem has a plethora of numbers, helplines and email addresses for different queries, and it’s important to make sure that you’re contacting the right one. A selection of these include:
Domestic Renewable Heat Incentive - Email DomesticRHI@ofgem.gov.uk, Phone: 0300 003 0744
Non-Domestic Renewable Heat Incentive - Email email@example.com, Phone: 0300 003 2289
Green Gas Support Scheme - Email GGSS.Enquiry@Ofgem.gov.uk, Phone: 0300 303 5997
Green Gas Levy - Email GGL.Enquiry@Ofgem.gov.uk, Phone: 0300 303 5997
Ofgem policies or functions - Email firstname.lastname@example.org, Phone: 020 7901 7295
A fuller range of options is detailed on the Ofgem ‘Contact Us’ pag.
Energy prices have been a contentious matter since the Russian invasion of Ukraine in February 2022. For businesses, much of the unhappiness with energy suppliers comes about when transferring from one to another, and you may be able to save yourself a lot of hassle by contacting the professionals when it comes to switching suppliers. SwitchPal can help you negotiate your way through a change of supplier, and changing suppliers at the end of a contract could save your business a lot of money!
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