Ofgem has defended the liberalized nature of the UK energy market in the face of criticism of the regulatory body during winter 2005/6.
The combination of competitive markets and effective, independent network regulation remain the best way of meeting the energy challenges of the future, Ofgem stated in its response to the government’s energy review.
Markets, while not perfect, are the best way to secure affordable, sustainable and secure energy supplies for consumers. Our recommendations for forward-looking analysis chime with our actions over last winter and in Europe to get greater market transparency to help industry make better investment decisions, says Ofgem chairman Sir John Mogg.
Acknowledging the growing influence of global and European developments on future energy supplies, Ofgem is ready to advise government in any assessment of geopolitical and systemic risks to future energy supplies, it says. Through work with other European regulators Ofgem will support efforts to increase competition in energy markets and carbon reduction.
Ofgem also backs government leadership in Europe to drive forward the liberalization agenda, and supports the EU emissions trading scheme (ETS) as the best tool to tackle carbon emissions. The regulator also suggests how a carbon contracts scheme could be used to help meet domestic carbon reduction targets while the future of the EU ETS is resolved.
These could be funded by revenues from auctioning allowances under the EU ETS scheme. This revenue could also be used to help fund further measures to alleviate fuel poverty, Ofgem believes.
Ofgem will continue to play its full part to help tackle fuel poverty, working in concert with government and industry. We recommend a new drive to ensure that the GBP3 billion of measures committed to help vulnerable households is better targeted and taken up: a new ‘find and fix’ approach to tackling fuel poverty, said Mr Mogg.
Ofgem’s response identifies three key challenges for government: clarity on nuclear licensing, planning and waste, further action on gas quality and a focus on incomes and housing, together with more centralized organization of existing schemes, to help tackle fuel poverty.