Ofgem CEO says household and industrial customers will remain a focus for the regulator

Press release
Dyddiad cyhoeddi
Sector diwydiant
Distribution Network
Generation and Wholesale Market
Supply and Retail Market
Transmission Network
  • In his speech, Jonathan Brearley will acknowledge the difficulties facing households and industrial customers, proposing a reform programme that will enable Ofgem and Government to move towards net zero whilst meeting the needs of customers and maximising the economic opportunity of energy investment.
  • Message is clear that while progress has been made within the energy sector, there is more work to do – and calls on review into Ofgem to redesign the regulator with broadened responsibilities
  • This comes on day Ofgem signs off radical connections reform to connect projects that are ready and needed to reach clean power by 2030 to the grid more quickly

Ofgem CEO Jonathan Brearley has today set out his vision for the future of the energy system, kicking off his new five-year term with a clear message: we’ve made progress, but there’s much more to do. 

In a major, wide-ranging speech to an audience of industry CEOs, investors, consumer groups and charities, Jonathan Brearley:

  • Called for a more enduring and strategic approach to affordability for customers, with targeted support which adapts as the market changes
  • Drew on a new ‘State of the Market’ report, which shows that despite stubbornly high bills, there’s been an improvement in consumer satisfaction and an increase in the use of flexible tariffs, though there remains work to be done
  • Outlined how today’s connections reform will fast track projects that are ready and needed, and said that the regulatory framework underpinning the energy sector can be a catalyst for growth – not a blocker.

Jonathan Brearley, Ofgem CEO, said:

“Without a doubt we are at a pivotal point in our energy transition.

“As a country, we are very exposed to the international gas price, and with gas prices high, this has left us in a difficult place when it comes to our industrial and domestic costs, which means we operate in a challenging international and domestic environment.

“The economics of renewables and the need to get away from gas setting the price, to provide cost effective and secure energy have never been more aligned. Where there is global uncertainty, Britain offers a stable regulatory regime, including CfDs and a safe haven for international investors.   

“We need to drive the energy transition as quickly as possible and make sure, along the way, we support those households and businesses worst affected. Working alongside government, the sector, charities and consumer groups, I’m confident that our reform plans will lead us to achieve these goals.”

Ofgem has also today published its final decision on significant reforms to the grid connections process that will fast-track cheaper, cleaner power plugging into the electricity grid.  

The reforms will see projects fast-tracked if they are ready to become operational and are needed to reach clean power by 2030.  

Projects that are “ready” and “needed” will be prioritised with new offers, some by the end of the year, cutting waiting times to connect to the grid, with the first projects to benefit from the reforms connected and operational from 2026.  

Ofgem’s new State of the Market report provides an overview of the energy sector and how energy firms are performing.  

Key headlines include: 

Customer satisfaction levels are higher than has previously been recorded, including among pre-payment meter customers. There’s still room for improvement though, and Ofgem is working to make energy one of the best markets for customer service:

  • Domestic complaint volumes have decreased, reaching their lowest levels since 2022. Consumer satisfaction rates have been increasing, with 81% of domestic customers reporting satisfaction with their energy supplier, the highest level our survey has recorded.
  • Our recent Energy Consumer Satisfaction Survey also showed that those who are most vulnerable have shown an increase in satisfaction rates over the past year.

Overall, on debt and arrears, trends show an increased debt and arrears intensity per customer rather than a rise in the overall number of customers in debt:

  • Accounts with a consumer repaying energy debt have levelled off at around 800k for electricity and 670k for gas from a peak of 1.3m for electricity and 1.19 for gas. 
  • However, the number of accounts in arrears with no repay arrangement in place is still going up at more than 1m for electricity and more than 866k for gas, highlighting ongoing affordability issues.

More choice, diversity and innovation in the sector is needed – but progress is being made on uptake of flexible tariffs and switching is returning to pre-crisis levels:

  • In the domestic market, the uptake of smart time of use (‘ToU’) tariffs has increased by over 75% in the past year, as rising electric vehicle (‘EV’) ownership encourages customers to shift towards more innovative and cost-effective energy solutions.

ENDS

NOTES TO EDITORS

State of the market report

Connections materials

Decision on Connections Reform Package - Decision on Connections Reform Package (TM04+) | Ofgem

Consumer Vulnerability Strategy:

Alongside today’s speech, Ofgem has also published its new Consumer Vulnerability Strategy. 

This new and improved strategy builds on Ofgem’s first ever Consumer Vulnerability Strategy in 2013.  With new challenges and price rises, Ofgem needs to respond accordingly by protecting consumers in vulnerable situations.

Ofgem has already made significant progress on this by introducing tougher rules on energy companies to do more to spot the signs when a customer may be struggling and step in to offer support. It has made prepayment the cheapest way to pay for energy and stepped in to protect vulnerable customers from inappropriate use of involuntary prepayment meter installations. It has also enhanced its Priority Services Register (PSR) data-sharing agreement between energy and water companies, ensuring that vulnerable customers can access support services more quickly and easily. 

The new strategy builds on these steps by simplifying previous requirements and creating fewer targeted yet more achievable outcomes for customers with a lasting impact. It has also been built to evolve to changing priorities in a fast-moving market and will be kept under constant review.

Financial resilience in the energy market:

Ofgem will soon publish a report into the position of the energy sector as of 31 March. 

Based on end February data and adding in the effect of actions taken in March we expect that report to show that the sector has moved from net negative assets during the crisis to positive Adjusted Net Assets of around £7bn now. 

Adjusted Net Assets are the types of capital that are more likely to be able to absorb losses.  20 domestic suppliers out of 23 reported being above the Capital Target. The other three have an agreed ‘credible’ Capitalisation Plan to reach it in the shortest reasonable time, including self-committed to controls such as not paying dividends.  If, in the future, any suppliers fall below the Capital Target without an approved Capitalisation Plan, they will be subject to default Transition Controls, which include a sales ban (a prohibition on marketing and customer acquisition activity to ensure that the risks to consumers do not increase). 

The intention of our new rules is to reduce the likelihood of suppliers failing and to reduce the costs should they do so. We do not seek to operate a “zero-failure regime”. We recognise that an appropriately resilient and reasonably profitable energy market, with a level playing field for responsible suppliers, is supportive of sustainable competition and investment. In such a market, companies may fail periodically for a variety of reasons, but the cost of that failure and impact on consumers should be small.