Ofgem said its consultation is the start of a longer-term engagement on how non-traditional business models (NTBMs) could transform the energy market and deliver desirable outcomes such as lower customer bills or a better quality of service, and ensure that regulation does not ‘stand in the way’.
It said the new wave of energy market entrants including community energy schemes, energy management companies, prosumers, and even diversification of energy companies into other markets is a trend it expects to continue.
Ofgem said this move away from traditional energy business models is in response to the low carbon transition, technological innovation and lack of consumer engagement and trust in the status quo.
It said that NTBMs potentially face a number of regulatory challenges due to the structure of the energy market, such as vertical integration and the lack of customer engagement, which are already being addressed by the ongoing Competition and Market Authority’s investigation.
However it also highlighted the need to balance encouraging new entrants with ensuring the interests of existing and future electricity and gas consumers are protected.
Ofgem chief executive Dermot Nolan said: “When Ofgem referred the energy market for a full competition investigation last June, we set out our firm view of the importance of innovative and ‘disruptive’ business models. I want us to get out of the way where regulation poses barriers, and to support innovation where the benefits are clear.”
“While the Competition and Markets Authority’s investigation continues apace and public interest in the energy sector remains high, now is the ideal time to open a debate on how consumers can benefit from the full transformative potential of non-traditional business models. I’m interested in how we can best support and encourage the new innovators, while promoting fairness, protecting consumer rights and keeping bills low.”
The consultation will close on the 20 May.