Summary of Key Points
Although utility regulation has special
characteristics of its own, its ubiquity and intrusiveness are
part of a more general increase of regulatory pressures in recent
years, including from Europe.
The broad discretionary nature of
utility regulation and its mingling together of diverse functions
which would normally be separated mean that Ofgem's accountability
to citizens or Parliament is blurred and indirect.
There is no direct incentive on Ofgem
to reduce operating costs, and the existing framework for the
financial accountability of UK energy regulation is insufficiently
transparent and requires fresh thought.
The role of the non-executive members
of Ofgem's governing body in shaping strategy, determining regulatory
policy, and checking the actions of the executive is unclear.
There is no formal institutional
mechanism at either government or parliamentary level for assessing
the effectiveness of regulation in the round, or for determining
whether regulation should be continued or withdrawn, in whole
or in part, in any particular sector.
There may be a case for a new cross-sectoral
Select Committee for Regulatory Accountability, with a specific
remit to monitor the interface between government policy and regulatory
Ofgem is currently immune to legal
challenge (except via judicial review) in almost all its key decisions,
and this situation should be corrected in the interests of all
Concern about the lack of appeal
rights is driven by both the desire to improve regulatory decisions
ex ante and the current restricted scope for effective
ex post appeal.
Utility regulators are ultimately
instruments of government, not representatives of the public,
and it would be appropriate for any grounds for ministerial intervention
in their work to be clearly specified in the sectoral statutes.