Ofgem reorganises around climate change

Gas and electricity industry watchdog Ofgem is undergoing a reorganisation and has created a new subsidiary which it says will help it better respond to the rise of climate change programmes in the UK.

Ofgem announced yesterday that it was changing its structure and forming the business unit Ofgem E-Serve to deal with the rise of electricity networks which support renewable energy as well as other sustainable projects such as smart meters.

The reorgainsation effectively splits Ofgem into two distinct parts. One half will continue to carry the name Ofgem and be concerned with policy and its continuing role as a industry regulator. The other half – under the E-Serve moniker – will be more proactive and focused on "delivery" and managing new environmental programmes.

E-Serve has been set up in response to the growing focus on sustainable power generation and renewables within Ofgem. The energy regulator already runs about £3.9bn of government environmental programmes, up from about £150m in 2001.

And it has been asked by the Department of Energy and Climate Change to oversee the introduction of smart meters to every home in the UK by 2020.

DECC has also proposed that Ofgem is responsible for the carbon capture and storage levy.

Ofgem’s group chief executive Alistair Buchanan said the regulator welcomed its changing role.

"Energy customers are concerned about climate change as well as the cost of energy. Ofgem has already demonstrated through its energy probe that we will root out any malpractice in the energy market. Now with the creation of Ofgem E-Serve and the restructuring of Ofgem, we can play an even greater role in helping to deliver Britain’s emission targets," he said.

Commenting on the timing of the decision, an Ofgem spokesman said the organisation was trying to anticipate its increasing responsibility for environmentally sustainable programmes.

"We want to put ourselves on the front foot to meet new challenges. There are already proposals to give us carbon capture and storage levies, there are smart meters, feed-in tariffs. We not only have new initiatives to manage but the existing programmes we run, such as the renewables obligation, are set to ramp up in the future so we need to put ourselves on a proper footing to manage those things," the spokesman said.

Ofgem may also look to recruit more staff if it continues to attract new environmental responsibilities, the spokesman added.

In May, the government set a goal of ensuring every home and business in the UK has a smart meter installed by 2020. The meter must be capable of providing real-time, accurate electricity and gas use data that will make it easier for people to reduce the amount of energy they use, switch suppliers, and ultimately take advantage of smart grid technologies.

"Smart meters will empower all consumers to monitor their own energy use and make reductions in energy consumption and carbon emissions as a result," said energy and climate change secretary Ed Miliband at the time. "Smart meters will also mean the end of inaccurate bills and estimated meter readings."

In February, Ofgem released new, stricter guidelines for green energy tariffs.

The changes will mean that suppliers offering green tariffs are now forced to demonstrate that they are making additional investments in renewables or carbon offsets over and above those investments already legally required under the government's existing Renewables Obligation scheme.