Ofgem has urged the government to amend the Renewables Obligation scheme to require suppliers to pay monthly instead of annually.
The regulator’s outgoing chief executive, Dermot Nolan, told Utility Week Congress in Birmingham that he had written to the Department for Business, Energy and Industrial Strategy (BEIS) and was confident changes would be made.
It comes after Ofgem issued a public warning to four suppliers who missed the initial deadline of 1 September, owing a total of £14.7 million.
Last year an “unprecedented” 34 suppliers failed to meet their full obligations by the September deadline.
Nolan said: “We have written to BEIS asking that they might change the legislative framework to make sure payments are perhaps quarterly but ideally every month, as happens with capacity auctions. I think that would change the incentive somewhat. I think BEIS will make changes in that regard, although I can’t speak for them.”
In a wide-ranging session on regulation, in which he appeared on stage with Ofwat chief executive, Rachel Fletcher, Nolan also talked about how Ofgem may have to become more “interventionalist” if it is to stimulate mass public behavioural change around decarbonisation.
He said this was particularly true when it came to electric vehicles and how to manage the demands on the networks resulting from charging.
He said: “Things we are thinking about at the moment include whether to put in some sort of mandate where the default charging rate at peak times is frankly very high. Now, that might evolve very naturally through market conditions and incentives but it might not. We might have to make an active intervention into people’s lives. They in turn may not like that. There may be outrage. So, we have to justify that level of intervention.”
Nolan hinted that Ofgem was actively considering ways to embed net-zero action within the regulatory framework, saying it had been discussed by the board over the summer. He said he expected a consultation on the regulator’s plans to be released by Christmas.
Nolan also addressed his tenure in his role, with his replacement Jonathan Brearley having been unveiled earlier this week.
Asked if an internal appointment meant he might step down earlier than the intended date of February, he said: “I think you’ll see me until Christmas, and possibly after, but I’m hoping for a relatively seamless transition and we’re already working on that.”
Reflecting on his six years at the helm, Nolan said his main regret was that he had not reacted more quickly to the CMA super-complaint and made moves to temper public concern around pricing.
However, he said he was comfortable with the position the market now finds itself in, admitting the price cap would cause some pain but that this was helping to drive a necessary transition.
He added: “I’m conscious that we set the price cap at a level where not many suppliers are making money from them. We were quite clear that would happen and I expect over time efficiencies should see firms becoming more profitable. But, it may also see some firms obliterated from the face of the earth. And, frankly that’s fine – that’s the nature of markets. Some companies succeed, some fail.
“I look back over my time and think there are many things I regret about the retail market and things I or we should have done differently or at different times but I don’t regret the current situation. The level of change and innovation that is taking place is quite spectacular and when I joined Ofgem in 2014 the phrase ‘the big six’ was enshrined as a constant. Now, there isn’t a big six – or at least not in the same way – and vertical integration is no longer really an issue.”