Who are Ofgem?

You have probably heard Ofgem mentioned everywhere you look when it comes to switching your electricity and gas, but who are they? And what difference do they actually make to your supply?

Ofgem Logo

Well, Ofgem is the Office of Gas and Electricity Markets. They are a non-ministerial government department and an independent National Regulatory Authority, with the role of protecting consumers now and in the future by writing guidelines that deliver a fairer, greener energy system.

The term “non-ministerial department within the UK Government” is a specific status given to only 22 departments in the UK, which is known to the likes of the Crown Prosecution Service, the Forestry Commission and National Savings and Investments and Ordnance Survey.

Gov.uk describes Ofgem to “regulate the monopoly companies which run electricity and gas networks, taking decisions on price controls and enforcement as well as acting on the interests of consumers.”

Ofgem works with the Government, industry and consumer groups to deliver a net-zero economy at the lowest cost to customers like yourself. They ensure fair treatment and drive down prices by enabling competition and innovation and opens the market for new services.

The company was founded on November 1st 2000, in a merger of the Office of Electricity Regulation and Office of Gas Supply, and is now held under Kwasi Kwarteng, the Secretary of State for Business, Energy and Industrial Strategy.

How are they governed?

Ofgem are governed by the Gas and Electricity Markets Authority (GEMA) and the Department of Energy and Climate Change (DECC).

 GEMA determines strategies, sets policy priorities and makes decisions on a varied range of regulatory matters, such as pricing controls and enforcement. With these regulations, GEMA has built the likes of the Gas Act 1986, the Electricity Act (1989) and Utlities Act (2000) and further measures set out in a number of Energy industry Acts. See:

GEMA is made up of non-executive and executive members, as well as a non-executive chair. Their non-executive members bring professional industry experience to the table regarding the likes of economics, consumer and social policy, finance and investment and European energy issues alongside science and environment.

Whereas the BEIS are a ministerial department, sometimes described as the “boss” of Ofgem. Although Ofgem came into being before its superior, with their title, they take responsibility for energy security, managing the UK’s energy legacy, supporting growth, action on climate change, and much more.

The BEIS may task Ofgem with delivering aspects of these topics such as promoting value for money, while they are responsible for overall affordability. Ofgem may focus on promoting the security of supply and sustainability, while the BEIS work on action on climate change and renewable energy.

Who do Ofgem protect?

By dedicating their organisation to working for consumers, Ofgem’s duty is to protect the interests of you as a buyer. To achieve this, while operating under a “consumer first” programme, they introduced a panel for everyday domestic customers to meet regularly and discuss key issues impacting their own participation in the energy market, with special attention paid to any other industry issues brought to their attention. You can see the notes taken at these meetings via Ofgem’s consumer research tab.

After the consumer first panel was successful, the group then introduced a Consumer Challenge Group relevant to work on network price controls; this group is made up of a small number of experts who act as a “critical friend” and bring additional expenses that a company may not be able to address through their market research alone.

As part of Ofgem’s promise is to protect consumers, we mustn’t forget the duty specifically relating to vulnerable individuals.

Following 2013s report of the same name, they wrote a Consumer Vulnerability Strategy in 2019 with the intention of outlining how they define vulnerability and reflecting on how they intend to protect customers in vulnerable situations until 2025. This is made up of five key themes, as follows

  • Improving identification of vulnerability and smart use of data
  • Supporting those struggling with their bills
  • Driving significant improvements in customer service for vulnerable groups
  • Encouraging positive and inclusive innovation
  • Working with others to solve issues that cut across multiple sectors

Funding and transparency

Although Ofgem is fully independent from the organisations which they regulate, they do recover the costs of their work from these licensed companies via an annual license fee. They aimed to see a reduction of 15% in 2019-2020 from 2015’s Spending Review settlement in 2015.

As a public service, it is important that the regulatory body commits to transparency at all times, and released this statement about how they are currently doing this, but to put it simply, Ofgem rely on four essential principles, alongside publishing a Forward Work Programme each year in order to share their main priorities for the following annum; deliverables and performance indicators for the following year are based on the Work Programme findings, and lastly, an Annual Report and Accounts, which are audited by the National Audit Office.

Ofgem’s personal four essential principles are (in their words):

PrincipleDefinition/explanation
TransparencyProviding clear, consistent, comparable and accessible information
AccountabilitySo that decision makers and budget holders can be held to account
SimplicitySo that it is easy to understand what is going on
CoherenceSo that our activities are clear and logical

Is Ofgem the Ombudsman?

Shortly, no. Ofgem is not an ombudsman due to the fact that it does not have an individual or business that you can complain to. Instead, the energy sector has its own ombudsman, approved by Ofgem, that independently handles disputes between consumers and energy suppliers.

While Ofgem will take an interest in large amounts of complaints about similar issues and companies, it should be done from a market investigation perspective rather than active customer engagement. Still, You can read their leaflet on how to complain with Ofgem here, that will tell you who you should contact in their place. This goes through a number of steps from contacting the company who you are complaining to directly, to Citizens Advice and even the Ombudsman services mentioned above.

Ofgem’s Successes

  • Leading government efforts to mitigate climate change, both through international action and cutting UK greenhouse gas emissions by at least 80% by 2050;
  • Leading efforts to ensure as a nation that we are sourcing at least 15% of our energy from renewable sources by 2021;
  • Committed to delivering secure, low-carbon energy at the least cost to consumers, taxpayers and the economy;
  • Committed to policies protecting the most vulnerable and fuel poor households and addressing the competitiveness problems faced by energy-intensive industries;
  • Delivering policies in a way that maximises the benefits to the economy in terms of jobs, growth and investment;
  • Making the most of the UK’s existing oil and gas reserves and seizing the opportunities presented by the rise of the global green economy;
  • Managing the UK’s energy legacy safely, securely and cost-effectively

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