Policy paper

CFP response to the Review of Ofgem call for evidence

Published 27 March 2025

The Committee on Fuel Poverty (the Committee) is an advisory Non-Departmental Public Body sponsored by the Department for Energy Security and Net Zero (DESNZ). The Committee advises on the effectiveness of policies aimed at reducing fuel poverty and encourages greater co-ordination across the organisations working to reduce fuel poverty.

The Committee welcomes the opportunity to comment on DESNZ’s call for evidence on its Review of Ofgem, recognising it is a good time to review Ofgem’s mandate, remit, and powers. Our comments are limited to the areas which align most closely with the Committee’s remit.

Legal mandate

The Committee agrees that Ofgem’s legal mandate should be amended. Using competition to achieve good outcomes for consumers is and should remain an important tool for Ofgem, where appropriate. But it should not be the preeminent approach to protecting the interests of existing and future consumers.

Ofgem always needs to balance multiple factors in making decisions, and the Committee thinks it would be more appropriate to explicitly cover this in the mandate, protecting the interests of consumers through balancing the often-competing needs of energy security, prices to consumers, and achieving the net zero transition. This would make clear that, save in exceptional circumstances, decisions should not be made that strongly favour, for example,  progress towards achieving net zero but at a cost of preventing financially vulnerable customers from being able to benefit from the changes because they cannot afford the upfront costs. Where exceptional circumstances do arise, Ofgem should be required to consult with DESNZ to discuss how the financially vulnerable can be supported through DESNZ’s role in fuel poverty and financial vulnerability more generally. Balancing three factors in taking decisions might appear to not give Ofgem that much guidance on how to exercise its mandate. However, combining this with the government’s periodic Strategy and Policy Statements should give Ofgem all the guidance it needs.

It follows that Ofgem’s duties should place a stronger emphasis on customer vulnerability than simply having ‘regard’ to it. First, consumer vulnerability should explicitly include financial vulnerability. Whilst Ofgem is not responsible for redistribution of money towards the financially vulnerable, it should be required to balance the interests of the financially vulnerable, as well as those with other vulnerabilities, with the interests of energy security and achieving the net zero transition in taking its decisions.

Ofgem’s regulatory remit

The lack of explicit inclusion of considering financial vulnerability when addressing consumer vulnerability is an area which causes uncertainty in Ofgem’s remit with regards to consumers. As noted above, it is an area which Ofgem should balance when considering decisions in the round.

Ofgem’s remit includes the administration and operational delivery of several social and environmental schemes. CFP believes this should continue to be the case, to avoid delays or uncertainty that would be introduced if it were moved elsewhere. Our comment below on gaining powers to deal with poor installation is contingent on Ofgem retaining this role.

Delivering investment and innovation in the transition

The consultation asks, ‘what might Ofgem do to support an environment of falling energy prices?’ The Committee’s view is that Ofgem needs first to have price as one of its key balancing factors in taking decisions, as set out above. Ofgem needs always to recognise that consumers are not homogenous, and that there are often both winners and losers from changes. In recognising this, it should focus on ensuring that consumers who are in fuel poverty are not left behind because of an inability to afford the cost needed to reap the benefits of changes. Where it does not have the explicit mandate to ensure this, it should be required to advise DESNZ on what changes it would need to make and have regard to DESNZ’s response in taking any decision that would adversely affect the fuel poor.

Low carbon technologies

DESNZ seeks view on Ofgem’s remit in enforcing consumer law in respect of low carbon technologies. Confidence in the net zero transition is only as strong as consumer confidence in installation of low carbon measures. The Committee believes Ofgem should have the mandate and the funding to become the preeminent enforcer of consumer law for all low carbon measures that can be installed under the various social and environmental schemes – including technologies such as heat pumps and solar panels, but also the installation of insultation measures.

Ofgem’s powers

The call for evidence seeks views on how Ofgem can ensure consumer standards are better represented. A consumer duty like that of the FCA, requiring firms to deliver good outcomes for retail customers might help, specifically in relation to price and value and consumer support. Such a duty would need to ensure a proper focus on good outcomes not just for customers in aggregate but the financially vulnerable.