The role of Ofgem
We were pleased that the regulator's initial findings
report and suggested recommendations sought to address many, though
not all, of the concerns set out in our earlier Report. Indeed,
its probe raised some issues that had not come to light in our
inquiry. For this we give Ofgem credit. However, it is clear that
in 2008 the regulator has been slow to respond to rising concern
over the functioning of the energy markets. We hope that in 2009
and onwards, the new Energy and Climate Change Committee will
not have to take the lead in setting the regulator's agenda as
we have found ourselves doing on too many occasions. (Paragraph
46)
Government Response
49. The Government echoes the Committee's endorsement
for the Ofgem probe into the energy supply market. We also feel
that this piece of work has unearthed some significant issues
for the sector, and we will continue to work closely with Ofgem
as they take forward the remedies to the issues with the market
which were identified.
We also express concern that the new consumer
representation processes and the plethora of bodies involved—Consumer
Direct, companies' complaints procedures, the Energy Ombudsman,
Consumer Focus and Ofgem itself—are opaque. Moreover, they
risk reducing Ofgem's awareness of issues of concern to consumers,
such as the recent complaints about direct debits. Ofgem and Consumer
Focus will need to have close and frequent contact. Otherwise,
the combination of a regulator which often needs to be prompted
to take action, and a lack of effective procedures for bringing
shortcomings to the attention of the regulator, will be a recipe
for poor representation of consumer interests. (Paragraph 47)
Government Response
50. The Government does not agree with the criticism
of the new consumer representation and complaints processes. Domestic
energy suppliers are required under their licence to provide contact
details for Consumer Direct on the back of their customer bills,
and most also give information about the Energy Ombudsman and
their own complaints procedures. In addition to the new arrangements
highlighted above, energy suppliers are now required to record
details of complaints made directly to them by their customers
and this information will be published by Consumer Focus.
51. Consumer Focus itself will provide intelligence
to Ofgem on issues affecting consumers, particularly regarding
those who may be vulnerable and on disconnection matters. In addition,
reporting arrangements are in place with Consumer Direct and the
Energy Ombudsman. Both will be important sources of intelligence
to Ofgem and Consumer Focus not only through providing monthly
information on contacts but on feeding through emerging issues
as they arise. These new arrangements recognise that there are
a number of players but their roles are quite distinct. Nevertheless,
the Government agrees that it will be important that all the parties,
including Consumer Focus and Ofgem, work closely together and
each maintain close contact with the others. The Government welcomes
the Memoranda of Understanding being developed between the bodies
which set out how they will work together.
We recommend the Government now investigates whether
Ofgem should have additional powers to guard against market abuses,
particularly in the wholesale electricity markets, and how these
powers might be granted. (Paragraph 48)
Government Response
52. Ofgem, following a decision to close a Competition
Act enquiry into the behaviour of Scottish Power and Scottish
and Southern Energy in the wholesale energy market, will consult
on additional powers and/or specific policy proposals to guard
against potential market abuse by the end of March. This may include
seeking to introduce a new Market Abuse Licence Condition for
energy suppliers.
