Ofgem announces overhaul of price control system

03/08/2010

Ofgem and the government have revealed plans to change energy regulation and overhaul the price control system.

The regulator's revamped price control will mean that businesses that innovate, provide a high level of customer service and put in place plans for investing in efficiency will be rewarded with fast-tracked price controls.

However, more intrusive regulatory scrutiny will be carried out for those that perform poorly.

The frequency of the price control review will also be extended from five years to eight and Ofgem will expand the Low Carbon Networks fund to facilitate innovation across the gas and electricity sectors.

According to analyst John Musk of Nomura, "the issue for the companies is that there's uncertainty in how they are going to be incentivised for investment".

Mr Musk believes that a more flexible approach will see the market become more competitive, which could result in a widening of returns on investment between companies that are innovating and those that are not.

Last month, former climate change secretary Ed Milliband said the coalition is going backwards in its pledge to be the greenest government ever; adding there would be a comprehensive review of the electricity market would be carried out by Ofgem.

Posted by Tom Barnett