In a speech delivered on 9 December 2008 at Imperial College, London, Ed Miliband, the minister in charge of the recently created Department of Energy and Climate Change, set out his vision for a stronger strategic policy role for the government in energy regulation. By doing so, he has potentially moved the goal posts in the regulatory "map" for electricity in the UK.
A number of factors were quoted by Ed Miliband in support of greater government involvement/intervention – e.g. climate change and its position on the global political agenda, and secondly, Britain's net energy exporter role moving to that of net importer, were quoted as reasons to challenge the market driven ideology that has characterised regulation of the electricity market since privatisation in the late 1980s. He also focussed on the many conflicts of interest that lie at the heart of electricity regulation. For example, the need to balance consumer prices today against the cost of investment in new generation and transmission resources for tomorrow, the need to improve security of supplies and the need to cut carbon emissions.
Although the speech stopped some way short of an outright attack on the role that OFGEM and its predecessors have played in the regulation of the market, it was clearly a carefully timed and considered indication of the Government's increasing frustration that its energy policies may not be achieved if it simply relies on the established regulatory framework.
A key example of this is the Transmission Access Review process currently underway, sponsored by NGET and OFGEM and taking place under the terms of one of the key industry codes (Connection and Use of System Codes) all the signs are that this valuable process will deliver change but possibly not the step change in grid access much in demand from renewable developers.
In an unusual move, significant amendments were made to the Energy Bill very late in the Parliamentary process that give the Government sweeping new powers to change the regulatory framework. For example, the Secretary of State may change any licence or any industry code or agreement maintained under a licence to facilitate "access to" and "efficient use" of the transmission system on and offshore in Great Britain. This provision can be triggered by the Government at a date of their choosing and the power to make this type of change must then be exercised within 2 years of that date. The Bill was finally enacted as the Energy Act 2008 on 26 November 2008.
Current and prospective market participants as well as developers, funders and all those interested in the electricity markets, should follow this debate with close attention. One thing that is very clear is that effective lobbying of Government has never been more important for the industry. It remains to be seen whether greater government engagement means better regulation or just a more volatile regulatory framework.