Ofgem welcomes proposed legal mandate to prioritise the UK's 2050 net zero target

7 Jun 2023 10:32 AM

Ofgem has welcomed the Government’s amendment to the Energy Bill giving the regulator a statutory net zero duty.

This will restate Ofgem’s principal objective to protect the interests of existing and future gas and electricity consumers.

It will add a specific duty to do so by supporting the Government meet its legal obligation to get to net zero by 2050, as required by the Climate Change Act 2008.

Ofgem CEO Jonathan Brearley said:

“Our fundamental objective will always be to protect the interests of existing and future consumers. It is at the heart of everything we do. Ofgem welcomes this mandate which brings us in line with the UK Government’s legal obligations and, for the first time, directly links consumers’ interests to specific net zero targets

“We’re clear consumers are best protected by building a low-carbon, low-cost energy system, scaling up long-term investment and stabilising prices with clean energy. The mandate sends a clear message we must end our historic dependency on fossil fuels and stop our exposure to volatile global markets.

“We’re laying the foundations for the energy system of the future. The net zero mandate has overwhelming backing from every part of the energy industry, consumer campaigners and climate activists. It underlines net zero is the best option, not only from a climate perspective, but to ensure a secure, low-cost energy future.”

Ofgem’s proposed net zero duty

• Ofgem’s principal statutory objective is to protect the interests of existing and future gas and electricity consumers.
• To date, this has included a general statutory duty to protect existing and future consumers’ interests by the reduction of greenhouse gases emissions in electricity and gas supply.
• The Energy Bill amendment will replace greenhouse gas emission wording with a specific reference to the Climate Change Act 2008.
• It gives Ofgem a specific net zero mandate to protect existing and future consumers’ interests by supporting “the Secretary of State’s compliance with the duties 1 and 4(1)(b) of the Climate Change Act 2008 (2050 net zero target and five-year carbon budgets)
• This will require Ofgem to apply and document this in decision making.
• The new duty will come into force two months after the Energy Bill gets Royal Assent.

Ofgem’s statutory framework

• Ofgem operates in a statutory framework set by Parliament. This establishes its duties and gives it powers to achieve its objectives.
• Gas and Electricity Markets Authority (Ofgem’s governing body) duties are set out in the Gas Act 1986 (Section 4AA) and Electricity Act 1989 (Section 3A).
• GEMA determines strategy, sets policy priorities and regulates, including price controls and enforcement under a wide range of legislation also including the Utilities Act 2000, Competition Act 1998, Enterprise Act 2002 and other energy acts.
• The government is responsible for setting the policy for the energy sector and proposing any changes to this statutory framework. 
• It is currently consulting on the new Strategy and Policy Statementwhich sets the government’s strategic priorities of its energy policy; the policy outcomes; and roles and responsibilities of those implementing that policy.