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Energy Bill update

Strategy and Policy Statement – priorities, outcomes and the role of Ofgem

In short

The Draft Energy Bill introduces a Strategy and Policy Statement which is intended to provide greater clarity and certainty to the roles of GEMA and the Government. The Strategy and Policy Statement will:

  • set out the Government’s strategic priorities for the energy sector in Great Britain;
  • describe the roles and responsibilities of various bodies who implement or are affected by energy policy in Great Britain; and
  • describe policy outcomes that are to be achieved by GEMA and the Secretary of State when regulating the energy sector.

The Strategy and Policy Statement will replace existing guidance for Ofgem on social and environmental matters.

Background

As part of the Coalition Government's programme, a commitment was made to review the current role of GEMA as the independent regulator for gas and electricity markets in Great Britain. As part of this commitment, the Ofgem Review Final Report was published in July 2011. This report concluded that more clarity and coherence was required between the roles of GEMA and the Government. The report also found that the Government should set out its strategic priorities for the energy industry and define the policy outcomes it considers GEMA should have a role in delivering.

To address the concerns concluded in the Ofgem Review Final Report, the Government proposes to introduce a Strategy and Policy Statement provide the clarity and certainty required, thereby strengthening the current regulatory framework.

Energy Bill Proposals

Chapter 8 of the Energy Bill sets out the legislative proposals for the Strategy and Policy Statement. The draft Bill sets out clauses providing for:

  • Designation of the Strategy and Policy Statement: The Secretary of State will be granted the power to designate a Strategy and Policy Statement, which will set out: (i) the Government's strategic priorities in formulating its energy policy; (ii) clear policy outcomes to be achieved as a result of implementing that policy; and (iii) the roles and responsibilities of the Government, Ofgem and others involved in implementing the policy.
  • Consequent Duties: GEMA will have a duty to regard the strategic priorities in the Strategy and Policy Statement. Both GEMA and the Secretary of State will have the duty to carry out their regulatory functions to ensure the delivery of the policy outcomes contained in the Strategy and Policy Statement.
  • 5 Year Review: The Secretary of State will be required to review the Strategy and Policy Statement every five years. A review may also be required following a general election, following significant unanticipated changes in energy policy, or where GEMA states that it is not realistically achievable to meet a policy outcome provided in the Strategy and Policy Statement.
  • Procedural Requirements: The Secretary of State will be required to consult with GEMA, the Scottish Ministers and the Welsh Ministers prior to laying the draft Strategy and Policy Statement before Parliament for debate and final approval. 
  • Reporting Requirements: There will also be an amendment made to GEMA's current reporting requirements under the Utilities Act 2000 to ensure that it publishes certain specified information in relation to the Strategy and Policy Statement.

Return to our Energy Bill update.