Select Committee on Constitution Minutes of Evidence

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assessing the effectiveness of regulation in the round, or for determining whether regulation should be continued or withdrawn, in whole or in part, in any particular sector.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 practice.

    —  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 sector stakeholders.

    —  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.

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