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, type =
Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of department of the United Kingdom government that deal with matters for which direct political oversight has been judged unnecessary or inappropriate. They are headed by senior civil s ...
, nativename = , nativename_a = , nativename_r = , logo = Ofgem logo.svg , logo_width = 124px , logo_caption = , seal = , seal_width = , seal_caption = , picture = , picture_width = , picture_caption = , formed = , preceding1 = Office of Electricity Regulation , preceding2 = Office of Gas Supply , dissolved = , superseding = , jurisdiction =
Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the largest European island and the ninth-largest island in the world. It ...
, headquarters = 10 South Colonnade,
Canary Wharf Canary Wharf is an area of London, England, located near the Isle of Dogs in the London Borough of Tower Hamlets. Canary Wharf is defined by the Greater London Authority as being part of London's central business district, alongside Central Lon ...
, London, , region_code = GB , coordinates = , employees = 1,187 , budget = For 2015–2016 Parliament approved through the Main Estimate a gross resource budget of £89.5 million , minister1_name =
Grant Shapps Grant Shapps (born 14 September 1968) is a British politician who is serving as Secretary of State for Business, Energy and Industrial Strategy since October 2022. He previously served as Secretary of State for Transport in the Johnson governm ...
, minister1_pfo =
Secretary of State for Business, Energy and Industrial Strategy The secretary of state for business, energy and industrial strategy, is a secretary of state in the Government of the United Kingdom, with responsibility for the Department for Business, Energy and Industrial Strategy. The incumbent is a memb ...
, chief1_name =
Jonathan Brearley Jonathan Brearley (23 July 1973) is the chief executive officer of Great Britain energy regulator Office of Gas and Electricity Markets. Early life Brearley grew up in Wiltshire. His father served in the Royal Navy and later became a charter ...
, chief1_position = Chief Executive , chief2_name = , chief2_position = , chief3_name = , chief3_position = , chief4_name = , chief4_position = , chief5_name = , chief5_position = , agency_type = , chief6_name = , chief6_position = , chief7_name = , chief7_position = , chief8_name = , chief8_position = , chief9_name = , chief9_position = , parent_department = , parent_agency = , child1_agency = , keydocument1 = , website = , footnotes = , map = , map_width = , map_caption = The Office of Gas and Electricity Markets (Ofgem), supporting the Gas and Electricity Markets Authority (GEMA), is the government regulator for the
electricity Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as describe ...
and
downstream Downstream may refer to: * Downstream (bioprocess) * Downstream (manufacturing) * Downstream (networking) * Downstream (software development) * Downstream (petroleum industry) * Upstream and downstream (DNA), determining relative positions on DNA ...
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbon d ...
markets in
Great Britain Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the largest European island and the ninth-largest island in the world. It ...
. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of Gas Supply (Ofgas).


Powers and duties

The authority's powers and duties are largely provided for in statute (such as the
Gas Act 1986 The Gas Act 1986 (Chapter 44) created the framework for privatisation of the gas supply industry in Great Britain. This legislation would be replacing the British Gas Corporation (government or state ownership) with British Gas plc (private own ...
, the Electricity Act 1989, the
Utilities Act 2000 The Utilities Act 2000c 27 is an Act of the Parliament of the United Kingdom that deals with the gas and electrical markets in the UK. It mainly modified the Gas Act 1986, the Gas Act 1995 and Electricity Act 1989. One of the greatest changes w ...
, the
Competition Act 1998 The Competition Act 1998 is the current major source of competition law in the United Kingdom, along with the Enterprise Act 2002. The act provides an updated framework for identifying and dealing with restrictive business practices and abuse o ...
, the
Enterprise Act 2002 The Enterprise Act 2002 is an Act of the Parliament of the United Kingdom which made major changes to UK competition law with respect to mergers and also changed the law governing insolvency bankruptcy. It made cartels illegal with a maximum pri ...
and the Energy Act 2004, the Energy Act 2008 and the Energy Act 2010) as well as arising from directly effective European Union legislation. Duties and functions concerning gas are set out in the Gas Act and those relating to electricity are set out in the Electricity Act. Its primary duty is to protect the interests of consumers, where possible by promoting competition. The Authority‘s main objective is to protect existing and future consumers' interests in relation to gas conveyed through pipes and electricity conveyed by distribution or transmission systems. Consumers' interests are their interests taken as a whole, including their interests in the reduction of greenhouse gases and in the security of the supply of gas and electricity to them. Since 2010 the Authority has imposed nearly £100 million in fines and redress levies against energy suppliers, including a £12 million redress levy on E.ON in May 2014, and a £1 million redress levy on
British Gas British Gas (trading as Scottish Gas in Scotland) is an energy and home services provider in the United Kingdom. It is the trading name of British Gas Services Limited and British Gas New Heating Limited, both subsidiaries of Centrica. Servi ...
in July 2014.


Structure

The Gas and Electricity Markets Authority is governed by the Chairman Martin Cave, executive members as well as non-executive members.
Jonathan Brearley Jonathan Brearley (23 July 1973) is the chief executive officer of Great Britain energy regulator Office of Gas and Electricity Markets. Early life Brearley grew up in Wiltshire. His father served in the Royal Navy and later became a charter ...
was appointed Chief Executive of Ofgem from February 2020.


Development of competition in the UK market


Background: Ofgas and OFFER

The liberalisation and
privatisation Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
of the energy markets in the United Kingdom began with the
Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013) was Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party from 1975 to 1990. She was the first female British prime ...
Government in the 1980s (often called the Thatcher-Lawson agenda, due to the key role of
Nigel Lawson Nigel Lawson, Baron Lawson of Blaby, (born 11 March 1932) is a British Conservative Party politician and journalist. He was a Member of Parliament representing the constituency of Blaby from 1974 to 1992, and served in the cabinet of Margar ...
in the Thatcher government cabinet). Aspects of the UK's model have been adopted by EU legislation. The privatisation of the gas and electricity supply industries was enacted by the
Gas Act 1986 The Gas Act 1986 (Chapter 44) created the framework for privatisation of the gas supply industry in Great Britain. This legislation would be replacing the British Gas Corporation (government or state ownership) with British Gas plc (private own ...
and the Electricity Act 1989. Section 1 of the respective Acts created the roles of Director General of Gas Supply and the Office of Gas Supply (Ofgas), and the Director General of Electricity Supply and the Office of Electricity Regulation (OFFER). These were economic regulators independent of government, but accountable to Parliament. This arrangement separated their regulatory decisions from political control in order to provide greater long term regulatory certainty and to encourage market entry and investment. The duties of the regulators were prescribed in Section 4 of the Gas Act 1986 and Section 3 of the Electricity Act 1989. Starting in the 1990s, the supply of electricity and gas to retail consumers in the UK has been unbundled from the rest of the industry. At the time of privatisation, British Gas and the regional public electricity suppliers held a
monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
on supplying all domestic gas and electricity consumers respectively. In 1997, British Gas was split (demerged) into
Centrica Centrica plc is a British multinational energy and services company with its headquarters in Windsor, Berkshire. Its principal activity is the supply of electricity and gas to consumers in the United Kingdom and Ireland. It is the largest s ...
and BG plc, in order to separate gas supply from its production and distribution. Between 1996 and 1999, domestic energy consumers were gradually able to choose their supplier. Finally, in May 1998 the domestic gas market was fully opened to competition, followed by the domestic
electricity market In a broad sense, an electricity market is a system that facilitates the exchange of electricity-related goods and services. During more than a century of evolution of the electric power industry, the economics of the electricity markets had u ...
in May 1999.


Role of Ofgem

Before there was competition in domestic markets, the regulators set
price controls Price controls are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of good ...
which fixed the maximum price that the monopoly suppliers could charge domestic customers. These controls remained in place when markets started to be liberalised, and were removed in stages between 2000 and 2002. Ofgem's decision to remove price controls was based on their assessment that competition was developing well at that time and that the
Competition Act 1998 The Competition Act 1998 is the current major source of competition law in the United Kingdom, along with the Enterprise Act 2002. The act provides an updated framework for identifying and dealing with restrictive business practices and abuse o ...
, being effective since March 2000, would deter companies from the abuse of market power, and provide Ofgem with sufficient power to tackle any abuse. Moreover, consumer surveys showed good awareness of the ability to switch, high and rising switching rates away from the former monopoly suppliers, and substantial and continuing falls in their market shares. Two years after the removal of the last price controls, in April 2004, Ofgem published a major review of the state of competition in the domestic energy supply markets, concluding that supply competition had delivered substantial benefits for all consumers and that the markets were competitive, though not yet mature. Between 2005 and 2007, Ofgem carried out a Supply Licence Review, resulting in simplification of supply licences, with the aim of reducing barriers to entry to the supply market, and enabling innovation. In 2006, Ofgem required the industry to set up and fund the Energy Supply Ombudsman in response to concerns over the handling of customer complaints. Ofgem's Energy Supply Probe, published in 2008 after increases in world fuel prices led to the doubling of the energy bill for a typical household, found that the market was still dominated by the " Big Six" suppliers: more than 70% of customers were still with their former monopoly suppliers, and new entrants had captured less than 0.3% of the market. Ofgem implemented a number of measures which improved the information provided to customers and made it easier for them to switch suppliers. The Big Six were obliged to separate their accounting for the supply and generation businesses, and Ofgem noted concerns over market abuses and unfair pricing.


CMA investigation, 2014–2016

In June 2014 Ofgem announced a
Competition and Markets Authority The Competition and Markets Authority (CMA) is the competition regulator in United Kingdom. It is a non-ministerial government department in the United Kingdom, responsible for strengthening business competition and preventing and reducing anti-com ...
(CMA) investigation into the trading practices and competitiveness of the country's "Big Six" energy companies:
Centrica Centrica plc is a British multinational energy and services company with its headquarters in Windsor, Berkshire. Its principal activity is the supply of electricity and gas to consumers in the United Kingdom and Ireland. It is the largest s ...
, SSE plc,
RWE npower Npower Limited is a British supplier of gas and electricity to businesses. It has been a subsidiary of E.ON UK since January 2019. The company was formerly known as Innogy plc and was listed on the London Stock Exchange and was a constituent ...
, E.ON, Scottish Power and
EDF Energy EDF Energy is a British integrated energy company, wholly owned by the French state-owned EDF (Électricité de France), with operations spanning electricity generation and the sale of natural gas and electricity to homes and businesses through ...
. The investigation, which took two years, followed a referral by Ofgem to the competition regulator. "There is near-unanimous support for a referral and the CMA investigation offers an important opportunity to clear the air. This will help rebuild consumer trust and confidence in the energy market as well as provide the certainty investors have called for," Ofgem CEO Dermot Nolan in announcing the investigation. In August 2016 Ofgem said that it would implement the CMA's recommendation that suppliers should be required to provide the details of customers who have been on expensive tariffs for three years or more to rival suppliers. Ofgem also said that it would impose an interim price cap on customers using pre-payment meters.


Energy price caps

In October 2017, Prime Minister
Theresa May Theresa Mary May, Lady May (; née Brasier; born 1 October 1956) is a British politician who served as Prime Minister of the United Kingdom and Leader of the Conservative Party from 2016 to 2019. She previously served in David Cameron's cab ...
announced her intention to introduce a cap on standard variable tariffs for energy customers, to be designed and implemented by Ofgem. The ''Domestic Gas and Electricity (Tariff Cap) Act 2018'' received Royal Assent on 19 July 2018. It stipulated that the price cap would be in place from the end of 2018 until 2020, when Ofgem would recommend whether the cap should remain on an annual basis up to 2023. Ofgem would also review the level of the cap at least every six months; from October 2022 reviews were to be conducted every three months, to reflect volatility in wholesale prices. Ofgem refers to this mechanism as the "default tariff" price cap, to distinguish it from the "prepayment" price cap, its other energy price cap.


Collapses of retail suppliers, 2021–2022

Between July 2021 and May 2022, 29 retail suppliers of gas and electricity collapsed, largely due to unprecedented increases in wholesale gas prices. Ofgem arranged for their customers to be transferred to other companies but this was not possible for the 1.7 million customers of the largest company to enter
administration Administration may refer to: Management of organizations * Management, the act of directing people towards accomplishing a goal ** Administrative Assistant, traditionally known as a Secretary, or also known as an administrative officer, admini ...
,
Bulb Energy Bulb Energy Ltd., trading as Bulb, is an energy supply company in the United Kingdom which was acquired by Octopus Energy in 2022. Founded in 2013, the company attracted venture capital from DST Global and Magnetar Capital, and ran at a financi ...
, which instead entered a special administration regime underwritten by the UK government. A July 2022 report "Energy pricing and the future of the energy market" by Parliament's Business, Energy and Industrial Strategy Committee found that Ofgem had been incompetent in its supervision of the finances of supplier companies, and that the government overlooked this lack of supervision because it prioritised competition over market regulation. In response, Ofgem accepted that its previous financial resilience regime was not sufficiently robust, and had contributed to some of the supplier failures since August 2021.


Allegations of abuse of power relating to whistleblowers

In September 2018, the Guardian published a report claiming that two Ofgem experts had been independently threatened with criminal sanctions if they publicly revealed information. Ofgem allegedly invoked section 105 of the
Utilities Act 2000 The Utilities Act 2000c 27 is an Act of the Parliament of the United Kingdom that deals with the gas and electrical markets in the UK. It mainly modified the Gas Act 1986, the Gas Act 1995 and Electricity Act 1989. One of the greatest changes w ...
, designed to protect national security, relating to concerns about energy meters and renewable heat incentive projects.


Alternative Dispute Resolution (ADR)

Under the Alternative Dispute Resolution for Consumer Disputes Regulations 2015, if an energy company fails to resolve a complaint through their own customer service efforts they will be required to advise the consumer of an approved ADR body. Ofgem is the Competent Authority responsible for approving ADR entities in the energy sector. Ofgem has only ever approved one ADR entity: Ombudsman Services.


Energy Industry Voluntary Redress Scheme

Ofgem launched an ''Energy Industry Voluntary Redress Scheme'' in 2018 to redistribute money paid by energy companies who have breached their operating licence conditions. Recipients of the fund include vulnerable energy consumers and developers of energy products and services that reduce the environmental impact. The scheme is managed by the Energy Saving Trust. Notable payments into the scheme include: £12.5m from
PayPoint PayPoint plc is a British business offering a system for paying Invoice, bills in United Kingdom, Republic of Ireland, Ireland and Romania. It is listed on the London Stock Exchange. History The PayPoint network was set up in 1996 with the aim of ...
for breaking the 1998 Competition Act; £8.9 from
OVO Energy OVO Energy is a major energy supplier based in Bristol, England. It was founded by Stephen Fitzpatrick and began trading energy in September 2009, buying and selling electricity and gas to supply domestic properties throughout the UK. By Ju ...
for overcharging customers; £4.5m from
Hornsea Wind Farm Hornsea Wind Farm is a Round 3 wind farm which began construction in 2018. Sited in the North Sea off the east coast of England, the eventual wind farm group is planned to have a total capacity of up to 6 gigawatt (GW). The development ha ...
, £4.5m from Npower and £1.5 from UK Power Networks for failing to remain connected after a lightning strike causing a widespread blackout on 9 August 2019; £2.8m from OVO Energy, £2m from Scottish Power, £1.3m from
British Gas British Gas (trading as Scottish Gas in Scotland) is an energy and home services provider in the United Kingdom. It is the trading name of British Gas Services Limited and British Gas New Heating Limited, both subsidiaries of Centrica. Servi ...
, £1.2m from Shell Energy, £1m from SSE plc and amounts from £7k to £713k from 13 other energy suppliers for overcharging between 2013 and 2020; £1.5m from
Utility Warehouse Utility Warehouse is a multiservice provider based in London, England that uses multi-level marketing to obtain customers through independent distributors. It is a brand name of its parent company, Telecom Plus. It currently handles over 814,00 ...
for treating customers unfairly and increasing their financial distress; and £1m from SSE plc for sending inaccurate customer statements.


Key people

Directors General of Ofgas * Sir James McKinnon, 1986 – October 1993 * Clare Spottiswoode CBE, October 1993 – October 1998 * Callum McCarthy, 1998 – 2002. Following the retirement of Stephen Littlechild, Callum McCarthy assumed the combined role of Director General of Ofgas and Director General of OFFER. Director General of OFFER * Stephen Charles Littlechild (b.1943), September 1989 – 1998 Chair and Chief Executive of Ofgem * Callum McCarthy, 1998 – October 2003. Following the end of tenure of Callum McCarthy the roles of Chair and Chief Executive Officer were split. Chair of Ofgem * Sir John Mogg (Baron Mogg), October 2003 – 2013 * David Gray, 2013–September 2018 * Martin Cave, from September 2018 Chief Executive Officer of Ofgem * Alistair Buchanan CBE, October 2003 – 2013 * Andrew Wright, interim CEO, June 2013 – March 2014 * Dermot Nolan, March 2014 – February 2020 * Jonathan Brearley, from February 2020


See also

* Consumer Focus (consumer watchdog) * Energy in the United Kingdom *
Energy policy of the United Kingdom The energy policy of the United Kingdom refers to the United Kingdom's efforts towards reducing energy intensity, reducing energy poverty, and maintaining energy supply reliability. The United Kingdom has had success in this, though energy in ...
* Electricity billing in the UK *
Energy switching services in the UK Energy switching services are companies that have come to exist since the EU began deregulating the gas and electricity markets, to open them to competition, in 1996.UK energy markets deregulated in 1996. Article retrieved 4 October 2013 https://w ...


References


External links

*
The role of energywatch and Ofgem
– Department of Trade and Industry, archived September 2008

archived June 2007 {{Authority control
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
Energy in the United Kingdom Organisations based in the City of Westminster Regulators of the United Kingdom Organizations established in 2000 2000 establishments in the United Kingdom