What is Ofgem?

Ofgem is the UK's energy market regulator, and its job is to keep energy suppliers in check and protect the interests of domestic and business energy users.

But what exactly is the job of the regulator? And does it make any difference to the cost of your energy bills? Let's take a closer look?

What does Ofgem do?

Ofgem's primary function is to oversee the energy market in the UK and make sure suppliers conform to certain standards, while protecting gas and electricity consumers. It does this be promoting the following:

  • Value for money
  • Security of supply and sustainability for current and future energy users, both domestic and commercial
  • Competition within the market
  • Delivery of government schemes

Ofgem is an official government regulatory body that is governed by the Gas and Electricity Market Authority (GEMA) and funded by an annual licence fee, which is paid by UK energy companies. Even though Ofgem is funded by the same energy suppliers that it regulates, it's an independent National Regulatory Authority, recognised by EU Directives, and a non-ministerial government department - this means it can act on behalf of consumers without being influenced by energy companies or ministers.

Why does the UK need an energy regulator?

When any market is opened up, it needs an independent body in place to make sure consumers are protected and companies act in good faith. That is why the UK has other bodies similar to Ofcom across other industries, including the Financial Conduct Authority (FCA) to regulate financial services and Ofcom to oversee the communications industry, including broadcasting, telecommunications and postal services.

A regulatory body is particularly important in those industries where there is a lack of effective competition or the possibility of price fixing - accusations which have both been levelled at the energy industry since it was deregulated back in 1989.

Up until the mid-80s, almost all of the gas and electricity used by UK homes and businesses was provided by British Gas, which was then state-owned.

But when the government opened up the energy market and privatised British Gas in 1986, it meant that more energy suppliers could vie for business in the UK, and with private companies come shareholder demands, which means suppliers might not necessarily act in the best interests of the consumers they're serving.

With the energy market deregulated, two regulatory bodies were set up - the Office of Gas Supply (Ofgas) and the Office of Electricity Regulation (OFFER).

The next big change in the UK energy market came in 1998, when the gas market was fully opened to competition and then in 1999, when the electricity market followed suit. This meant consumers could choose to switch to any energy supplier they wanted, and in 2000 Ofgas and OFFER merged to form Ofgem.

Does Ofgem set energy prices?

One of the first decisions made by the newly formed regulator was taken between 2000 and 2002, when it removed the price controls which fixed a maximum price that suppliers could charge domestic customers.

Although this was done to promote competition in the market, it was essentially reversed in 2018 when it introduced a cap on the amount suppliers could charge on standard variable rate energy tariffs, following pressure from the government to end 'rip-off' energy prices.

Even so, Ofgem doesn't set energy prices in the UK, and each energy supplier is free to set its own rates.

How does Ofgem help consumers?

Ofgem is responsible for protecting the interests of both commercial and domestic energy consumers, which it does in any number of ways from investigations into supplier behaviour and promoting support for vulnerable consumers. It also helps ensure that energy companies meet their social and environmental responsibilities.

If a new energy company enters the market, it's the job of Ofgem to make sure it adheres to all current rules, regulations and standards, including how it approaches new customers and how it deals with existing customers.

When looking out for the interests of consumers, Ofgem has issued energy companies with fines and sanctions for the following:

  • Mis-selling to customers by doorstep and phone
  • Wrongly charging customers fees
  • Having insufficient complaint handling procedures

What is the Ofgem Confidence Code?

The Ofgem Confidence Code is a voluntary code of conduct adhered to by a select number of energy price comparison sites, including TheEnergyShop.com.

The code is designed to protect consumers and ensure that each of the signatories to the code carry out in-depth, unbiased and accurate comparisons of the UK energy market at all times in a fair and consistent way. The Code is periodically reviewed by the regulator to ensure it continues to offer value to consumers and not mislead or confuse customers who are comparing energy prices.

TheEnergyShop.com has been a signatory of the Code since it's foundation under Energywatch in 2003.

Who regulates Ofgem?

Ofgem is governed by the Gas and Electricity Markets Authority (GEMA), which is made up of a non-executive chair, along with non-executive and executive members from a variety of backgrounds, including:

  • industry
  • economics
  • science and the environment
  • consumer and social policy
  • finance and investment
  • European energy issues

In turn, the powers of GEMA are all enshrined in law, under the following legislation and measures set out in any subsequent Energy Acts:

  • Gas Act 1986
  • Electricity Act 1989
  • Utilities Act 2000
  • Competition Act 1998
  • Enterprise Act 2002

Can you complain to Ofgem?

If you have an issue with your energy supplier, you need to make a complaint directly to them, giving them up to eight weeks to respond. If they don't respond within this timeframe, or you're not happy with the decision, you can use the Ofgem complaints system.

The regulator can then take up the issue with the supplier concerned. You can do this by emailing - consumeraffairs@ofgem.gov.uk - or calling the ofgem contact number on 020 7901 7295.

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Ofgem Confidence Code
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