Ofgem strategy goes beyond ‘platitudes’

Former regulator welcomes “radically different” thinking in new strategy for energy system regulation

Ofgem’s recently revealed strategy for the future of energy system regulation has succeeded in going beyond “platitudes and principles”, a former senior energy regulator has said.

Writing for Utility Week, Maxine Frerk, who was senior partner for networks regulation at Ofgem until last year, said the “high-level vision” set out by Ofgem is “an important step towards a more agile approach to regulation”.

“There is a risk that a strategy can be just platitudes and principles but this does actually dig beneath the surface in a few important areas,” she wrote.

Frerk noted the “radically different approaches” Ofgem has suggested might replace current network charging mechanisms “such as auctions for access rights”.

She observed that the regulator had also raised key questions about how it might progress with such changes “alongside the more ‘incremental’ (but potentially still very significant) changes that might come out of the targeted charging review”.

Frerk gave her approval for other parts of Ofgem’s new strategy, such as its acknowledgement of cyber security challenges – including “the importance of knowing who is responsible for what” – and the inclusion of “a full list of the factors that create distortions between distribution and transmission”.

Producing this list was something “a number of us were arguing Ofgem should have done before settling on its approach to embedded benefits,” she added.

In addition to Frerk’s largely positive appraisal of Ofgem’s new strategy, she did note some areas of weakness and “areas that are missing”.

She pointed to comments from Simon Harrison, chair of the Future Power System Architecture Project, which raised concerns about the lack of attention given to “behind the meter applications”.

The FPSA “might also have mentioned the wider aspects of system operability from an engineering perspective,” said Frerk.

The other “weak spot” she identified was around the future of gas and heat. Frerk said the strategy’s “limited” references to this challenge appeared “a bit of an afterthought”.

Overall however, she was clear that the document provides “a helpful overview of the challenges of regulating for this new [energy] world”.

“The test then is whether this strategy does visibly underpin future Ofgem decisions – we wait to see.”