Ofgem Review, 2026

The report sets out the detailed findings of the government’s review of Ofgem. The review assessed whether Ofgem’s structure, statutory duties and organisational culture remain fit for purpose. It focused on 7 core objectives: redefining regulatory boundaries clarifying Ofgem’s mandate and duties strengthening consumer protection and service standards assessing and reforming regulatory powers enhancing skills and capability supporting economic growth and net zero improving transparency and scrutiny The review was launched with a call for evidence in December 2024. Ministerial foreword Families and businesses across Britain will worry about the ongoing impact of events in the Middle East on the cost of living here at home. Since the start of this crisis the government has been focused on fighting people’s corner while learning the right long-term lessons for our country. Thanks to the decisions we took at the Budget last year, the energy price cap fell by 7% at the start of April, with savings locked in until the end of June. And in recent weeks we have acted to prevent unfair practices like price-gouging, help those who rely on heating oil, and ensure businesses get a fair deal on their bills. Meanwhile, we are going further and faster to get off the rollercoaster of fossil fuel markets with clean homegrown power that we control—bringing forward our next renewables auction, speeding ahead on new nuclear power, and bringing “plug in solar” to the UK for the first time. Today we publish the final report of the Ofgem Review—strengthening the energy regulator to protect families and businesses from bad practice, while driving forward our mission to take back control of Britain’s energy and bring down bills for good. In December 2024 we kicked off the first comprehensive review in Ofgem ’s 25-year history to ensure it has the powers to act as a strong consumer champion, while securing the investment in clean energy needed to deliver energy security and lower bills, and driving economic growth. What we heard was that Ofgem needed to evolve to stay ahead of a rapidly changing energy landscape across retail, networks, and new technologies. The measures we are setting out today will empower Ofgem to enforce the highest standards and crack down on instances of bad practice in the energy market—with new powers to directly enforce consumer law without needing to go through the courts; hold executives individually accountable in cases of wrongdoing; and limit bonuses if rules are broken. This review also marks the first step in giving Ofgem the power to regulate parts of the energy sector, such as heating oil, which for too long have lacked proper consumer protection. And it will support the steps we are taking to ensure billpayers will also get access to quicker, fairer and easier compensation when things go wrong. In doing so, we will build a more focused, empowered and expert regulator that is fit for the future in a changing energy system—with the powers and capability needed to act decisively, stand up for consumers and help secure Britain’s energy independence. The government looks forward to working with Ofgem , industry and others to implement these reforms. We will continue to do whatever it takes to stand up for consumers, as we build an energy system that will protect families and businesses over the years ahead. The Rt Hon Ed Miliband MP, Secretary of State for Energy Security and Net Zero Executive summary The UK energy system is undergoing profound transformation. The transition to clean energy, new technologies and business models, and the evolving role of energy in consumers’ lives are reshaping the market. This is a critical opportunity to ensure the regulatory framework remains fit for purpose. The Department for Energy Security and Net Zero ( DESNZ ) will support the Office of Gas and Electricity Markets ( Ofgem ) to reform so it can meet the demands of a more dynamic energy system. This report sets out a focused programme to modernise Ofgem , strengthening consumer protection, enabling more proportionate and innovative regulation, and clarifying system boundaries while wider market and system reform continues. It strengthens Ofgem ’s foundations so it can adapt as the market evolves, maintain a clear focus on consumers, and support more coherent roles and responsibilities across the system. A core objective is to sharpen the division of responsibilities between government and the independent regulator. Government will set the strategic outcomes and priorities - the ‘what’ - through a reformed, Ofgem -specific Strategy and Policy Statement ( SPS ), while Ofgem will determine the ‘how’ within its remit. This provides greater clarity for consumers, investors and the wider market, supports transparent decision-making and long-term certainty, and strengthens accountability. As implementation begins, DESNZ and Ofgem will also work with the National Energy System Operator ( NESO ) and stakeholders to clarify and maintain aligned roles across the 3 organisations. Ofgem was established in 2000 to regulate the newly liberalised energy supply sector and promote competition. It has delivered important benefits for households and businesses, including improved consumer protections and support for network delivery. However, the Review concludes that Ofgem ’s current structure, tools and capabilities are no longer sufficient for a more complex and fast-changing energy system. To reduce the risk of consumer detriment, it needs clearer responsibilities, stronger and more agile enforcement, and enhanced organisational capability to anticipate risks and act decisively. This is not about more regulation, but better regulation: targeted, proportionate and outcomes based. The reforms are designed to reduce unnecessary burden while raising standards and improving consumer experience, enabling Ofgem to regulate more effectively and efficiently in the interests of consumers. The Review assessed whether Ofgem ’s structure, statutory duties and organisational culture remain fit for purpose. It focused on 7 core objectives: Redefining regulatory boundaries Clarifying Ofgem ’s mandate and duties Strengthening consumer protection and service standards Assessing and reforming regulatory powers Enhancing skills and capability Supporting economic growth and net zero Improving transparency and scrutiny Stakeholder engagement highlighted a clear need for reform. Many pointed to confusion and duplication across Ofgem , DESNZ and NESO , creating inefficiency and blurred accountability. Suppliers described overlapping duties and reactive regulation; consumer groups raised concerns about weak enforcement and limited redress; and other firms highlighted high staff turnover and gaps in digital and financial expertise. Some also described a risk-averse, process-heavy culture that can slow decision-making and inhibit innovation. The report sets out reforms to deliver 6 strategic outcomes for a reformed Ofgem (detailed in Section 5): A strategic, outcomes-focused regulator A clearly defined system and remit A high-performing, expert organisation An empowered regulator that protects and promotes consumer interests A regulator that enables innovation, investment, growth and the clean energy transition A transparent and accountable regulator To deliver these outcomes, DESNZ and Ofgem will implement a focused set of reforms: clarifying institutional roles, modernising statutory duties to enable forward-looking regulation, strengthening enforcement and redress, and enhancing digital, financial and technical capability. Together, these changes will reinforce Ofgem ’s independence, sharpen its regulatory tools, and strengthen its ability to oversee a dynamic, decarbonising energy market, improving service standards and supporting energy security and economic growth. See Annex B for the Review’s full table of actions. 1. Context The energy system plays an essential role in daily life, keeping homes warm, powering transport and supporting businesses and public services. Russia’s illegal invasion of Ukraine, and recent events in the Middle East, have exposed the UK’s vulnerability to volatile fossil fuel markets, contributing to higher bills. Clean, homegrown energy is central to improving energy security and reducing exposure to future shocks. Delivering a clean, secure and fair energy system depends on an effective regulator and a regulatory framework that supports timely infrastructure delivery, maintains resilience and protects consumers. Public confidence also relies on high service standards and robust enforcement when companies fall short. The government’s Industrial Strategy set out the importance of energy to economic growth. It noted the need to tackle high industrial electricity costs, strengthen economic security, reduce regulatory burdens, and remove planning barriers. Ofgem has a critical part to play in delivering those objectives, shaping incentives for investment in networks and clean energy, while protecting consumers. Ofgem is also an enabler of growth in high potential sectors, including clean energy manufacturing and innovation, advanced manufacturing, digital and technology, and foundational industries. [footnote 1] The UK Infrastructure: A 10 Year Strategy also underlined Ofgem ’s role in driving investment across regulated sectors, including through timely regulatory approvals and improvements to regulatory processes. [footnote 2] The government’s manifesto committed to putting in place a tougher system of regulation that puts energy consumers first and attracts the investment needed to cut bills. To do this, it pledged to strengthen the regulator to ensure it can hold companies to account for wrongdoing, require higher standards of performance, and ensure there is automatic customer compensation for failure. The government’s review of Ofgem is a critical step to delivering that commitment. Ofgem Ofgem (the Office of Gas and Electricity Markets) is the regulator for gas and electricity markets in Great Britain. The Gas and Electricity Markets Authority ( GEMA ) was created by the Utilities Act 2000, merging the functions of the Directors General of Gas Supply and Electricity Supply. Ofgem was established to support and deliver the functions of GEMA . At creation, it had a principal objective “to protect the interests of consumers […] wherever appropriate by promoting effective competition.” In carrying out that duty, it was required to have regard to: secure that demands for gas and electricity are met secure that licence holders are able to finance their activities the interests of specific consumers (for example, disabled consumers, those on low incomes) Ofgem ’s core role includes issuing the licences which energy suppliers, network operators, and generators need to carry out regulated activities. It sets licence conditions, monitors compliance against them, and takes enforcement action when they are not met. Ofgem also manages changes to the energy industry codes, which set out the detailed rules that facilitate gas and electricity markets, and without which the energy regulatory system would not function. Energy industry codes are detailed rulebooks that govern the operation of the energy system, covering everything from how companies interact with the grid to how consumers are switched between suppliers. They are essential for ensuring the market runs smoothly, transparently, and in the interests of consumers and industry participants. Through the ongoing Code Governance Reform ( CGR ) Programme energy industry codes are undergoing significant reform. Ofgem operates under a complicated legal framework with multiple responsibilities that have been introduced over the years. As the energy sector has changed and new goals for the regulator have emerged, Ofgem has taken on further duties. This has resulted in reduced clarity in Ofgem ’s role and purpose. When Ofgem was first established, the initial focus was on promoting competition in a newly liberalised market, but over time there has been a shift in focus, with a greater emphasis on consumer protection and affordability. Competition remains an important factor, not least because Ofgem ’s economic regulation of monopoly networks acts as a proxy for competition, but events such as doorstep mis-selling and supplier insolvencies have highlighted the need to ensure consumers are adequately protected. Whilst competition is, and must remain, inherent in an innovative and consumer-focused market, prioritising competition alone has been shown not to be sufficient. As an organisation, Ofgem has also increased in size significantly over the last decade, particularly following the energy crisis. Ofgem ’s workforce stood at 890 full-time equivalent ( FTE ) staff in the 2014/15 financial year. [footnote 3] In the 2020/21 financial year, Ofgem employed 1,187 full-time equivalent ( FTE ) staff, split relatively equally across Regulatory, e-Serve and Operations functions. [footnote 4] By the 2024/25 financial year, this had grown to 2,110. In Ofgem ’s latest Annual Report and Accounts ( ARA ), the average number of people employed in Regulatory roles had increased above those in Delivery and Schemes. [footnote 5] As part of implementing this review, and examining the skills and capabilities of the organisation, Ofgem must ensure that it is operating in an efficient and cost effective way, with the right calibre and number of people, and in the right areas. A changing energy market The energy market, consumer expectations and the development of clean power and clean technologies have fundamentally changed since 2000. Ever increasing numbers of consumers are now adopting clean technologies from electric vehicles to heat pumps, are choosing smart and time of use tariffs, and engaging with their energy usage in different ways through smart meters. An effective regulator to oversee the energy system of 2030 and beyond differs significantly from one operating in 2000. The composition of the retail market is fundamentally different, in terms of the companies operating within it, the requirements and expectations on suppliers, and the offer to consumers. These have been driven by the impacts of the energy crisis, and by changes such as smart meters, the emergence of consumer-led flexibility and in anticipation of market-wide half-hourly settlement ( MHHS ). The introduction of the price cap (2019), in particular, was a significant intervention in the market, which continues to play a key role in how the market is structured and regulated. These changes, amongst others, will mean the retail market continues to evolve, bringing with them further opportunities for innovation. A regulator that can support that innovation and ensure the retail market is attractive and investable with pricing and service benefits to consumers will be key to capitalising on those opportunities. The electricity system is undergoing rapid change, including the need to connect new generation, upgrade networks, and modernise planning and connections processes. This increases the importance of timely, transparent regulatory decisions on price controls, investment incentives and consumer impacts, and reinforces the need for clear roles across DESNZ , NESO and Ofgem . Networks are also undergoing significant change. Grid strengthening and faster connections are needed to deliver clean power and support economic growth, alongside reforms to planning and the connections process to prioritise viable, strategically aligned projects. This reinforces the need for regulatory decisions that are timely, transparent and focused on long-term value for money. Ofgem ’s decisions increasingly involve complex trade-offs, including how to enable essential investment while protecting consumers and ensuring value for money over time. This report focuses on the reforms needed so Ofgem can make those decisions more strategically, transparently and at pace. Similarly, generation has changed significantly in the time since Ofgem was created. In 2000, over a third of our electricity generation came from coal, and less than 1% from wind and solar. [footnote 6] By contrast in 2024, onshore wind, offshore wind, and solar accounted for 34.2% of electricity generated, and by Q2 2024 there was over 70 GW of wind and solar capacity, either currently installed or committed/under construction. [footnote 7] The decisions Ofgem makes on price controls, infrastructure build-out, and investment are crucial. The way costs are allocated and recovered within the system including the costs which fall on consumer bills today and in the future will involve complex trade-offs to be made. As the market and our energy infrastructure change, it will be vital that our approach to governance of the energy system, through the regulator and government, takes a whole system approach to consider carefully how we can deliver best value for money for consumers and drive down bills while delivering the essential investment needed to maintain and expand the energy system to keep pace with a changing and electrifying economy. Beyond this review, these issues and the appropriate role of different actors in the system, including Ofgem , will need to be considered on an ongoing basis alongside wider system and market reform. Challenges to consumer confidence in the energy market have also emerged, including through failings in consumer protection. Failures by energy suppliers to follow the rules on the forced installation of prepayment meters saw Ofgem requiring suppliers to pay £18.6m in compensation and debt write offs to 40,000 customers. While Ofgem introduced stringent new rules for the installation of prepayment meters in 2023, there remains a need to reset and further improve consumer confidence in the regulator and the regulatory environment. Energy crisis The 2021/22 energy crisis exposed vulnerabilities in market oversight and consumer protection. Britain saw 30 suppliers fail, including Bulb entering the Special Administration Regime, and public trust was damaged by poor outcomes and the sense that risks were not identified early enough. The experience underlined the need for a regulator that can anticipate risks, act earlier, and enforce higher standards while remaining focused on its core remit and clear accountability. In 2000, the average dual fuel bill for a customer paying by direct debit stood at less than £641 in 2010 prices [footnote 8] (around £1,000 when adjusted for inflation); by contrast, at the end of 2025 it stood, as measured by the energy price cap, at £1,755 for the typical household using electricity and gas [footnote 9] and paying by direct debit [footnote 10] - reflecting much higher wholesale gas costs. Household energy debt has also increased, with the total financial value of domestic energy customer debt and arrears now standing at over £4bn. [footnote 11] This underlines the importance of bringing down bills. The government has already taken steps to tackle the high cost of energy, including additional funding towards the cost of the Renewables Obligation ( RO ) and ending levy funding for the Energy Company Obligation ( ECO ). The Warm Homes Plan, alongside Great British Energy, will support the roll out of clean energy and upgrades to homes to reduce bills. These measures support delivery of a clean power system that can lower bills sustainably and strengthen energy security. Ofgem also has a role in relation to bills, including through the price control framework and work to consider fairer and more efficient allocation of system costs through the Cost Allocation and Recovery Review. [footnote 12] Regulator reform In 2025 the government set out plans to ensure that the UK’s approach to regulators and regulation supports economic growth, recognising that well-designed and implemented regulation is an essential tool to promote growth and investment. [footnote 13] A coherent, modern and transparent regulatory framework, delivered by an outcomes-focused and independent regulator, is essential for investor confidence and for protecting consumers. It should support investment and innovation while maintaining predictable, proportionate decision-making. The government’s action plan set out commitments to overhaul our regulatory system so that it: supports growth: protecting consumers whilst encouraging new investment, innovation, and growth is targeted and proportionate: regulating only where necessary is transparent and predictable: fostering certainty for investment adapts to keep pace with innovation: allowing the UK to take advantage of new technologies and innovations These expectations are particularly relevant for Ofgem , given its central role in consumer protection, network regulation and enabling investment. Ofgem has committed to reducing administrative burdens, including reviewing its own costs and streamlining regulatory processes to support innovation and growth. These reforms aim to ensure that Ofgem is not only accountable for its decisions but also actively enabling investment, innovation, and consumer protection in a rapidly evolving energy system. In addition, the action plan sets out Ofgem ’s commitments to deliver a number of specific actions to ensure the regulatory framework it oversees delivers growth. These included working with the National Wealth Fund and Great British Energy to ensure regulation and government levers support new entrants into the market, considering the future of the retail market and its contribution to system transformation and growth, and updating its licence application guidance to support innovators. This review builds upon those existing commitments and sets out further measures to ensure that Ofgem is equipped to support the government’s growth mission. Ofgem Review Given the manifesto commitment to strengthen Ofgem , the government’s ambitions to modernise the UK’s approach to regulation, and the fast-changing energy landscape, conducting a detailed review of Ofgem was timely and critical. The review was launched with a call for evidence ( CfE ) in December 2024. The review’s terms of reference ( Annex A ) set out an aim to establish an energy regulator fit for the future. [footnote 14] It would consider how to set up Ofgem so it can regulate a fast-changing market to deliver a fair deal for consumers as we transition to net zero. The terms of reference set out that the review would examine: Aims Focus Protecting consumers and delivering fair outcomes Whether Ofgem has the right mandate and duties - Whether Ofgem ’s scope and remit has kept pace with a changing energy market - Whether Ofgem has the right powers to protect consumers - Ofgem ’s compliance and enforcement tools Delivering investment and innovation in the transition Ofgem ’s role to support growth and the government’s industrial strategy - Ofgem ’s role in a system driven by strategic planning, following the creation of NESO Strengthening performance and accountability Ensuring proper transparency and accountability of Ofgem - Ofgem ’s capabilities to be an effective regulator The scope and focus of the review were on Ofgem as a regulator and an organisation, not the detailed regulatory framework put in place by Ofgem . The review considered evidence of both strengths and weaknesses in Ofgem ’s approach. This report does not assess individual rules, licence conditions, or specific regulatory decisions; where examples are referenced, they are included only to illustrate evidence that informed the review’s conclusions. Alongside its findings and conclusions, this report presents a set of actions to be taken forward by the government and Ofgem to deliver the reforms required to make Ofgem a regulator fit for the future. A summary table of actions is included at Annex B . This report sets out a significant package of reform to make Ofgem a regulator fit for the future, but it is not the end of the Ofgem Review process. Some reforms require legislation (for example, changes to Ofgem ’s duties), while others require Ofgem to improve its skills, capability, and organisational culture. Those changes will take time but are as integral to reform as changes to Ofgem ’s legal mandate or powers. Section 6 (‘Implementing the Ofgem Review’s Findings’) sets out how the findings will be taken forward. Further work is needed to clarify roles and responsibilities across the sector. While the review provided an opportunity to identify areas of overlap and ambiguity in Ofgem ’s role, it did not seek to provide definitive answers at this stage. DESNZ will undertake more detailed work with NESO and Ofgem , including alongside work on reformed national pricing and implementation of the Strategic Spatial Energy Plan ( SSEP ), to better define roles and responsibilities and reduce duplication. 2. The Ofgem Review process The Ofgem Review has been led by officials from DESNZ within the scope of the terms of reference published when the review was announced. A public CfE was published in December 2024 to gather views from across the energy sector, including consumer representatives, regulated entities and investors. The CfE invited stakeholders to share their experiences of engaging with Ofgem , highlight challenges and propose solutions. Ofgem engaged constructively throughout to support a comprehensive evidence base. The CfE received approximately 20,000 submissions, which informed the review’s findings and recommendations. Further detail is provided in the government’s published Summary of Responses. DESNZ appointed an Independent Advisory Panel to provide advice and challenge throughout the review. The panel brought a range of expertise and perspectives to assess evidence and shape recommendations; membership is set out in Annex C . We are grateful and record our thanks to the panel members for their valuable contributions, challenge and feedback as the review’s conclusions and proposals were developed. Alongside this, DESNZ engaged Ofgem throughout the process to test evidence and ensure the review reflected operational realities, alongside wider stakeholder input. In addition to the panel’s input, DESNZ held targeted roundtables and bilateral meetings at both official and ministerial level to explore the experiences of specific parts of the energy sector, ensuring the review was informed by a broad and representative evidence base. DESNZ aligned this work with the Regulation Action Plan led by the Department for Business and Trade ( DBT ) and engaged other relevant departments, including Department for Environment, Food and Rural Affairs ( Defra ) Independent Water Commission work chaired by Sir Jon Cunliffe. [footnote 15] 3. The challenge A complex statutory framework Ofgem was established 25 years ago to promote competition in gas and electricity markets. Its remit has since expanded significantly, including delivery of social and environmental schemes and supporting the transition to clean energy. Duties have been added incrementally over time (see Annex D ), creating a complex statutory framework that can make it harder to take clear, timely and strategic decisions in consumers’ interests. Stakeholders raised concerns that the current duties can create ambiguity in how Ofgem balances affordability today with investment that protects consumers over time. Evidence suggests that focusing narrowly on short term bill impacts can store up higher costs later, for example where delayed investment leads to more urgent, expensive upgrades. Ofgem needs a framework that supports sustained, efficient investment and spreads costs fairly, so consumers see benefits sooner and are protected from avoidable future price shocks. The review also found that Ofgem could go further in protecting consumers if its responsibilities were clearer and its mandate stronger. Stakeholders highlighted blurred boundaries between government and the regulator, with Ofgem at times stepping into decisions that may be better owned by government for example changes to standing charges for prepayment meter customers. Too often, interventions have been reactive addressing problems after harm has occurred rather than preventing detriment through clearer accountability and earlier action. These issues are compounded by the limited strategic steer available from government. The current Strategy and Policy Statement ( SPS ) [footnote 16] is too broad to give Ofgem the clarity it needs to align decisions with long term national priorities particularly where trade-offs have distributional or political consequences. A clearer statutory framework and a sharper SPS would enable Ofgem to anticipate change, act at pace and regulate in a more outcomes focused way that delivers for consumers. An evolving sector The energy sector is changing rapidly in ways the current regulatory model was not designed for. New technologies, decentralised business models and changing consumer behaviours are reshaping how energy is generated, traded and consumed. Yet Ofgem ’s framework remains rooted in historic legislation built for a simpler system, even as the boundaries around energy supply become less clear. Innovation can bring better services and new ways for consumers to benefit, but it can also create new risks. Where new markets emerge especially outside Ofgem ’s existing approach oversight can lag. Stakeholders described Ofgem as too reactive in closing gaps, contributing to consumer harm and uncertainty for innovators. A more proactive approach to monitoring, horizon scanning and early intervention is needed. Greater collaboration is needed between Ofgem and other bodies, within and beyond the energy sector. Poor alignment between Ofgem , DESNZ and NESO can undermine regulatory coherence and blur accountability. More widely, limited coordination with other regulators can create gaps and inconsistencies, increasing the risk of consumer harm and giving unregulated actors an advantage. Ofgem ’s remit has expanded into scheme delivery, which can dilute focus and add organisational complexity. A clearer remit is needed so Ofgem can concentrate on effective regulation in a fast-changing energy system. A changing context The outcomes required from the energy system have shifted and will continue to evolve. In speeches to the Energy UK Conference in September 2024 [footnote 17] and October 2025 [footnote 18] , the Secretary of State described a new context: beyond the traditional trilemma of affordability, security and stability, there is now a clean energy imperative investment at speed and scale to meet rising demand, reduce reliance on fossil fuels and build a more resilient system. Delivering these objectives requires a different regulatory approach from one designed 25 years ago for a more fossil fuel based, less complex system. Market structures, technologies, cost drivers, and consumer expectations have all changed. This sharpens the questions the regulator must answer: how to balance long-term investment and system transformation with affordability today; how to enable innovation while preventing harm; and how to ensure consumers share the benefits of the transition. Ofgem must be equipped to make these trade-offs transparently, at pace and within clear accountability. An outdated approach Stakeholders identified Ofgem ’s prescriptive, rules-based approach as a barrier to new products, services, and business models. A shift towards more flexible, outcomes focused regulation would better reflect the complexity of today’s system and create stronger incentives for innovation while still protecting consumers and managing systemic risk where detailed rules are necessary. Prescriptive rules will still be needed in some areas particularly to protect consumers and manage systemic risks, but they should not be the default. The regulatory model should evolve towards more principles based, proportionate and outcomes focused approaches that can adapt to a decarbonising, more dynamic energy system. Rising complexity alongside supplier failures has exposed gaps and grey areas in Ofgem ’s powers and responsibilities. These should be addressed so consumers get the protection they need and confidence in the sector can be rebuilt. An ever-increasing remit Originally, the regulator’s focus was relatively narrow: economic regulation and protecting consumers. Over time, expectations and responsibilities have expanded, including significant scheme delivery. This has pulled the organisation away from its core purpose as an economic and consumer protection regulator. In parallel, the regulator has become more active in areas closer to public policy than independent regulation. Clearer boundaries are needed: government should set and own policy, while the regulator provides independent oversight, enforcement, and consumer protection. The regulator should avoid being drawn into contested political choices, especially as energy issues have become more polarised. Evidence, analysis, and technical advice will always be a core contribution, but this review is an opportunity to re set roles. Ofgem ’s leadership should routinely assess whether proposed interventions sit within its core regulatory purpose, or risk moving into policy in ways that are unhelpful for long term consumer interests and the regulator’s effectiveness. DESNZ also noted concerns about blurred boundaries between DESNZ , Ofgem and NESO , creating duplication and ‘person marking’ of roles. Clarifying responsibilities is essential for stronger accountability and for keeping Ofgem focused on effective economic regulation and consumer protection. Ensuring appropriate accountability Ofgem ’s operational independence is essential. However, some stakeholders felt decision-making is not sufficiently transparent, and industry participants described consultation and information requests as high in volume without clear feedback on how evidence is used. Stakeholders also raised concerns about limited visibility of Ofgem ’s internal processes, including how trade-offs are weighed and how stakeholder input influences outcomes. Where decisions have significant implications for markets and consumers, clearer explanations and stronger feedback loops would help build confidence in the regulator’s effectiveness and impartiality. Expectations of Ofgem have also changed. Where regulatory failings have contributed to harm such as poorly capitalised suppliers ahead of the energy crisis, or wrongful prepayment meter installations, scrutiny from ministers and Parliament is appropriate. Some stakeholders felt this has also driven short term, reactive behaviour. Reform should clarify when government input is appropriate, while strengthening Ofgem ’s ability to anticipate issues, act earlier and protect consumers without compromising its independence. As a non-ministerial government department, Ofgem is accountable to Parliament. While its Annual Report and Accounts and select committee sessions provide oversight, stakeholders noted these routes do not always enable detailed scrutiny of day-to-day performance. Capability and cultural challenges Stakeholder engagement, including the call for evidence ( CfE ), identified persistent challenges in Ofgem ’s skills, capability, and organisational culture. These issues have become more acute as Ofgem ’s remit has expanded and the system has grown more complex. Stakeholders highlighted difficulties attracting and retaining specialist skills, high turnover and loss of institutional knowledge. Pay was frequently cited as a constraint compared with other bodies such as the Competition and Markets Authority ( CMA ), Financial Conduct authority ( FCA ) and Office of Communications ( Ofcom ). Capability gaps can contribute to delays and inefficiencies, reducing confidence among licensees, investors and business consumers. Stakeholders also described a culture that can feel opaque, risk averse and resistant to change, with staff not always empowered to take decisions at the right level. Ofgem ’s previous transformation programme was viewed as disruptive, with uncertainty about the benefits achieved. Externally, some see Ofgem as process-heavy and slow, which can hinder constructive engagement. Low trust between parts of industry and the regulator can further limit collaboration. Inadequate access to redress DESNZ also heard concerns about access to redress. For many consumers, the market is hard to navigate, and it is not always clear where to complain or how to secure redress for poor service. Consumers may be unaware of compensation they are entitled to and claiming it can be slow and confusing. Automatic compensation applies in only a limited set of circumstances. The Energy Ombudsman ( EO ), as Ofgem ’s approved Alternative Dispute Resolution ( ADR ) body, can resolve complaints where consumers and suppliers cannot agree. However, it cannot currently enforce compliance where remedies are delayed or not delivered. While the EO can escalate issues to Ofgem , Ofgem ’s role is to address systemic problems rather than intervene case-by-case. As a result, some consumers do not receive timely redress, undermining trust in the market. 4. A regulator fit for the future While the government has conducted a review of Ofgem and this report sets out a package of reforms, it remains committed to the principle of Ofgem as an independent regulator for the energy sector in Great Britain. The reforms set out below will modernise Ofgem to ensure it is ready for regulating a rapidly changing market, with the right duties, remit, powers, skills, and capability for doing so. The government’s vision for a reformed Ofgem delivers 6 strategic outcomes: Outcome 1: A strategic, outcomes-focused regulator Outcome 2: A clearly defined system and remit Outcome 3: A high-performing, expert organisation Outcome 4: An empowered regulator that protects and promotes consumer interests Outcome 5: A regulator that enables innovation, investment, growth, and the clean energy transition Outcome 6: A transparent and accountable regulator Outcome 1: A strategic, outcomes-focused regulator The regulator should have a clearer focus on the outcomes its regulation is intended to deliver. This means a clearly defined set of duties for Ofgem , giving certainty to consumers and the market about the outcomes Ofgem will seek to deliver. It also means government should be clear on its priorities for Ofgem and how it expects the regulator to contribute to them, while safeguarding Ofgem ’s regulatory independence. Finally, it means a regulator that is focused on its core functions of economic and consumer protection regulation. Outcome 2: A clearly defined system and remit There should be clear expectations on the regulator, both in terms of its role and what it regulates. Ofgem ’s regulatory remit should be properly aligned with the market it is responsible for regulating, and it should be able to keep pace as the sector changes and evolves. It also means clarity on what Ofgem does and doesn’t do, including how it interfaces with and collaborates with other organisations, such as government, NESO and other regulators. Outcome 3: A high-performing, expert organisation Regulating a more digital, complex and fast-moving energy sector will rely on having the right skills, capability and culture. This means ensuring Ofgem will have the right industry and technical expertise to regulate effectively, will take a modern approach to regulation, and will be an organisation with an open and collaborative culture. It should build effective partnerships with industry, including on the development of regulatory initiatives and with other regulators. It should also be a regulator that retains and develops talent within the organisation. Outcome 4: An empowered regulator that protects and promotes consumer interests This means a regulator that will have the right tools to effectively regulate the market it oversees, both to support growth and innovation and to enforce good outcomes for consumers. Ofgem ’s tools should be appropriately calibrated to its regulatory functions, so it can take timely, proportionate action to monitor the market, intervene where needed, and ensure consumer law, licence conditions and relevant rules are complied with. It also means the right accountability mechanisms should be in place, so regulated and licensed entities and senior individuals are incentivised to act in consumers’ best interests. This outcome should be anchored in ensuring Ofgem exercises its powers in a predictable, proportionate, and accountable manner. The review recognises the need for balance and careful implementation, including where it recommends expanding Ofgem ’s powers. The proposals for new or reformed powers are designed with the reformed regulator in mind and reflect the other strategic outcomes. Outcome 5: A regulator that enables innovation, investment, growth, and the clean energy transition Kickstarting economic growth is one of the government’s 5 missions, and Ofgem ’s role in supporting growth was recognised through the addition of a growth duty in 2024. Ofgem ’s approach to regulating the energy market should encourage new investment, innovation, and growth. This means a regulator with a clearer and more prominent focus on growth, ensuring its approach to economic regulation promotes investment and innovation in the energy sector and the wider economy, and supports an efficient energy system that reduces costs for consumers and businesses. It should challenge itself to keep regulation modern and proportionate, and work with industry to support investment and the delivery of the infrastructure needed for clean power and net zero. Outcome 6: A transparent and accountable regulator Independent regulation is and will remain the cornerstone of Ofgem ’s role and functions. However, consumers, industry and investors should have confidence that the regulator will be transparent in how it operates and will be held to account for delivery. This means improving parliamentary scrutiny and oversight of Ofgem ’s performance, ensuring Ofgem operates in a clear and accessible way, and putting effective mechanisms in place to scrutinise Ofgem . Ofgem ’s annual report and accounts should provide a clear and balanced view of performance against its duties and priorities, including improved key performance indicators ( KPIs ). It also means clear, time bound targets for processing regulatory authorisations, and opportunities for stakeholders to provide constructive challenge on how the regulator conducts its functions. As an independent regulator responsible for overseeing an essential service and a sector that attracted £23.6bn of investment in energy industries in 2024 [footnote 19] , it is important that Ofgem is transparent in how it operates and that appropriate mechanisms are in place to hold it to account. Building on the measures in the Regulation Action Plan, the government will embed measures to hold Ofgem to account for performance against its duties. 5. Strategic outcomes for reform The government’s ambition is for Ofgem to be a modern, confident, and outcomes-focused regulator, one that protects consumers, supports investment and innovation, and delivers a fair, secure and affordable energy system. This is of increasing importance against a backdrop of rapid transformation in the energy sector. Each outcome reflects a clear priority for reform whether it is clarifying Ofgem ’s remit, strengthening consumer protection, enabling innovation and growth, or improving transparency and accountability. Together, these outcomes form a coherent package of actions designed to equip Ofgem with the statutory duties, powers, and organisational capability it needs to deliver for consumers and the country as a whole. The following sections set out each outcome in detail, explaining the rationale for change, the specific reforms proposed, and the impact these changes are expected to have on the energy system and its users. Outcome 1: A strategic, outcomes-focused regulator Reform Clearer focus and streamlined objectives/duties Stakeholder feedback noted that Ofgem ’s role and remit had expanded quite significantly over time. When Ofgem was formed in 2000, it had a principal objective to protect the interests of current and future consumers (wherever appropriate, by promoting competition) and primary duties around demand, supplier finance, and vulnerable consumers, some of which had already been in place since the privatisation of the energy sector in the 1980s. By 2023, the number of primary duties had roughly tripled in number (see Annex D ). This proliferation of duties reduced the strategic focus of the organisation, and we heard feedback that Ofgem ’s need to balance such a large range of competing objectives hindered its decision-making processes. The Regulation Action Plan contained a commitment to streamline Ofgem ’s duties, which the government will take forward through the review. Streamlining Ofgem ’s duties will remove outdated and extraneous considerations from its statutory framework, allowing the regulator to refocus on its function as an economic and consumer protection regulator. Stakeholders supported streamlining the duties, and frequently mentioned consumer protection, economic growth, investment, innovation, and the transition to cleaner energy as the areas Ofgem should focus on. As DESNZ considered the way to crystallise these considerations into as focused a set of duties as possible, it became clear that consumer interests, economic growth (including supporting investment and innovation), and the clean energy transition were the key thematic areas. These also align with wider government priorities, including 2 of the government’s 5 missions. A new set of 3 equal principal objectives will be introduced, focusing on the interests of existing and future consumers, net zero and growth. The government will move away from a single, overriding principal objective. This does not downgrade the importance of consumer protection: Ofgem will still have a clear mandate to protect existing and future consumers. However, 2 additional principal objectives will enable Ofgem to take a more balanced view of wider consumer and societal benefit. This will be supported by a reformed Strategy and Policy Statement ( SPS ) to provide clearer and more targeted strategic priorities and policy outcomes to guide the regulator in balancing its duties and navigating trade-offs. DESNZ considered whether Ofgem should retain an overarching principal objective. Stakeholder feedback suggested that the primacy of the current principal objective, which takes precedence over Ofgem ’s other objectives, can make it harder for Ofgem to take a holistic, strategic view when making decisions. Acting through the lens of a single principal objective can be self-defeating where it leads to storing up higher costs that must be met later (often by consumers). In some instances, longer term considerations such as timely investment in energy networks have not been prioritised within Ofgem ’s decision-making processes. Stakeholders also raised concerns that it could limit consideration of wider outcomes that support job creation and business investment. This will also better align Ofgem with the context of the energy sector in the present day, and in the future, rather than the sector as it was decades ago. Each of its principal objectives will have equal legal status, providing Ofgem with a flexible statutory framework from which to take proactive and future-focused decisions, making the necessary trade-offs to ensure long-term outcomes and broader consumer benefit can be prioritised where required. Distilling Ofgem ’s statutory framework to 3 core objectives (removing misaligned obligations) will reduce complexity and bring greater clarity to its decision-making processes. This will be supported by a targeted Ofgem -specific SPS , which will set out the relevant policy outcomes whose delivery Ofgem must seek to further when it carries out its regulatory functions. This will guide Ofgem in navigating complex trade-offs between its objectives and taking well-reasoned, strategic decisions when balancing the interests of both existing and future consumers. It is our view that adopting this approach will, along with the provision of new powers detailed later in this report, strengthen Ofgem ’s ability to protect consumers. Feedback from this review has clearly demonstrated that despite consumer protection being Ofgem ’s current principal objective, this has not been sufficient to prevent severe issues developing that have resulted in consumer detriment. Allowing more equitable consideration of these wider objectives will elevate Ofgem ’s ability to protect consumers from immediate harms and ensure continued optimal consumer outcomes in the future, whilst realising the full potential benefit to consumers from a modern and innovative energy system. Refocusing Ofgem ’s primary duties to include broader outcomes such as a cleaner energy system and economic growth expands its consumer protection mandate by providing an opportunity take a more holistic approach, particularly when coupled with enhanced powers to address immediate harms. This will include the ability to directly enforce consumer law, better hold companies to account through an Individual Accountability Mechanism and additional deterrents for interconnected companies. Together this will place holistic consumer protection front and centre for the regulator and position it as a proactive and robust consumer champion. While the streamlined duties will replace the existing duties on issues like licensees’ financial security [footnote 20] , investability / financiability and competition, these will continue to be important outcomes that Ofgem must take into account. In introducing these reforms alongside a future new SPS , the government will carefully consider the strategic direction and outcomes it sets for Ofgem , and how government perceives that factors such as energy security and competition should be considered. In particular, the removal of a stand-alone reference to competition from Ofgem ’s statutory duties recognises that Ofgem should have greater flexibility over how and where it considers competition when protecting consumer interests and supporting economic growth. Competition is inherent in a market that is innovating and focusing on the needs of consumers, but a narrow focus on competition for its own sake has been shown not to work as needed in the context of energy consumers. The SPS will also guide Ofgem on the considerations underpinning existing and future consumers, clean energy, and economic growth to support its operational decision-making. As explained below, the SPS reforms will also include the introducing of a mechanism for Ofgem to request input from government. This mechanism will support the SPS in retaining strategic relevance over its lifecycle and will ensure that Ofgem has a continued understanding over the context in which it makes its independent operational decisions. Action 1: Streamline Ofgem ’s existing duties to provide a clearer, strategic framework. This should retain its principal objective to protect existing and future consumers, alongside 2 additional principal objectives, on an equal footing, for facilitating net zero and promoting economic growth. A focus on regulation When it was established, Ofgem ’s role was more narrowly focused on driving competition. Over time, this has changed with the organisation taking on further responsibility for delivery of environmental and social schemes. Through the review, we also heard concerns from stakeholders about blurred lines of responsibility between Ofgem and other organisations operating in the energy system. Ofgem ’s role has also changed as it became the economic regulator for the NESO , the independent, public corporation responsible for strategic planning for the energy system and system operation for electricity. Industry stakeholders, in particular, noted a need to clarify Ofgem ’s role and remit with respect of the government and NESO , with calls to ensure that there is a transparent delineation of responsibilities between the 3 organisations. We received feedback both that there was a risk of duplication of responsibilities, or in some cases a lack of clear ownership of functions leading to a cap in accountability. Feedback from the call for evidence ( CfE ) also highlighted a clear preference for Ofgem ’s role to be refocused back on its core regulatory functions. As Ofgem has taken on further responsibilities, this has placed additional demands on its organisational and leadership capacity, diluting its strategic focus on economic and consumer protection regulation. A strong, effective regulator is critical to the delivery of a clean, secure, and fair energy system. Therefore, Ofgem ’s role and remit will be returned to its core regulatory responsibilities. This means that as a rule, Ofgem will not be responsible for the administration and delivery of schemes except where it remains the best-placed body to do so. Where there are licence conditions or other regulatory requirements which underpin the delivery of schemes, Ofgem will still have powers to carry out compliance and enforcement activities. This also means that Ofgem should prioritise the delivery of regulation over progressing policy initiatives. There is clearly a valuable contribution Ofgem can make to aid the delivery and development of government policy in a facilitative and supporting capacity. There will also be policy decisions in the regulatory policy space, for example on the design of future regulatory frameworks, where Ofgem will continue to play an active role. However, Ofgem ’s priority should be on the implementing, delivering, and monitoring the regulatory framework, with policy being driven by government. This is complementary to the framework of the SPS , in which government sets out the policy outcomes that informs the manner in which Ofgem carries out its regulatory functions. As a regulator, Ofgem should focus on ensuring high standards of service are achieved across the sector and that services are reliable and not exploitative. Ofgem ’s statutory duties should focus it on supporting policy goals, but a regulator like Ofgem does not have a role in setting energy policy or commenting on the impacts of energy policies. To support clearer accountability across the sector, the government will take forward further work to improve clarity on the respective roles and responsibilities of government, NESO , and Ofgem and this will form part of the next steps in developing and consulting on future Strategy and Policy Statements. Scheme delivery In response to the CfE , numerous stakeholders noted that Ofgem had increasingly taken on a range of other responsibilities beyond its core functions of an economic and consumer regulator. Some stakeholders were concerned that this meant Ofgem had taken on too many (and sometimes disparate) responsibilities, which prevented a strategic focus on its core functions as a regulator. The UK’s buildings decarbonisation and energy efficiency landscape has evolved over decades through various government policies and delivery bodies, resulting in a complex system of scheme delivery, substantially, but not solely, delivered via Ofgem . To meet the scale and urgency of current buildings decarbonisation challenges, a more coordinated, and effective delivery model is needed. Recognising this, as contained within our Warm Homes Plan, the government is considering the wider delivery landscape for existing and future schemes. The Warm Homes Plan set out proposals to consolidate scheme administration across existing delivery partners, including Ofgem Delivery and Schemes, in a new Warm Homes Agency. The proposals within the Warm Homes Plan seek to streamline operations, improving outcomes for consumers and taxpayers through greater operational efficiency. The process and timings of Ofgem continuing to deliver and transitioning schemes to alternative delivery organisations, will be set out in due course. Action 2: Ofgem ’s remit to be refocused on its core functions as an economic and consumer protection regulator. Action 3: Ofgem will not take on any new scheme delivery on behalf of government unless there is a very strong strategic alignment or value for money case to do so. Strategic steers Under the provisions of the Energy Act 2013, a power was introduced to designate a Strategy and Policy Statement ( SPS ) to set out the government’s strategic priorities for energy policy, outcomes to be achieved through the implementation of policy, and the roles and responsibilities of those involved in implementing it. Ofgem must conduct applicable regulatory functions in the manner it considers is best calculated to further the delivery of the policy outcomes set out in the SPS , and Ofgem is required to have regard to the strategic priorities set out in the SPS when conducting those regulatory functions. Owing to Ofgem ’s independence, the SPS is one of the few tools that government has to provide Ofgem with a strategic and policy steer on government’s priorities. However, as supported by our engagement throughout the review, the current SPS is not sufficient in providing clear strategic direction directly to Ofgem because government, Ofgem and NESO all have some level of responsibility towards the SPS in some capacity. This limits the extent to which government can be specific in setting out the outcomes and priorities government would like Ofgem to further delivery of without inadvertently assigning an inappropriate outcome or priority to NESO , for example in relation to Ofgem ’s duties and functions as an economic regulator. The provision of more targeted and explicit steers to Ofgem will be critical in enabling the regulator to effectively balance its duties and make the necessary trade-offs to achieve the outcomes set by government and agreed by Parliament. Therefore, the government will ensure an Ofgem -specific SPS is created to replace the existing SPS . This Ofgem -specific SPS will sit alongside a NESO -specific SPS , setting out separate but aligned priorities and outcomes, whilst providing both organisations with clearer strategic direction that reflects their distinct roles. Where appropriate, the government will ensure that the content and process for the 2 SPS documents are joined up so they are complementary and effective. In addition, the government will look to introduce a mechanism for Ofgem to request guidance from government on matters relating to the SPS . This is not expected to be routine, and Ofgem will remain the final decision-maker on matters within its remit and will be required to set out how it has balanced any advice or guidance received from the Secretary of State via this mechanism. The mechanism is intended to enable more informed decision-making where there are implications for the wider strategic framework set by government. This does not undermine Ofgem ’s regulatory independence, and this review does not seek to redraw the lines of independence. Instead, Ofgem will continue to be the independent regulatory authority for the energy sector directly accountable to Parliament. The SPS will continue to act as a tool to more effectively support the appropriate balance of roles and responsibilities between government and Ofgem , with government setting the ‘what’ (that is ‘what’ outcomes Ofgem must seek to further the delivery of and ‘what’ it must have regard to) whilst Ofgem , with its capabilities as an independent regulator, best determines ‘how’ these outcomes should be achieved when acting within its remit. This means that government sets the policy outcomes, and Ofgem ’s strategy and policy should be devised in a way which it considers most effective for furthering delivery of those outcomes. Parliament will continue to scrutinise how well Ofgem has performed in doing this through Ofgem ’s annual reporting requirements. In this sense, the SPS will set out strategic and policy direction for Ofgem , but not legal direction on operational decisions as this would involve changes to Ofgem ’s level of independence. Action 4: Remove the existing SPS and create an Ofgem -specific Strategy and Policy Statement ( SPS ) to provide more targeted strategic steers to support it in its unique role as a regulator. This will also necessitate the creation of a NESO -specific SPS . Action 5: A new SPS to be designated as soon as practicable once the necessary provisions for a revised SPS process are in place. Action 6: Reform the process for designating the SPS to ensure it can be put in place or amended more quickly, whilst retaining opportunities for stakeholder input and consultation and Parliamentary scrutiny. Action 7: Introduce a mechanism for Ofgem to request steers from government to assist the regulator in performing its duties or managing trade-offs between them. Ofgem will continue to be the final decision-maker for decisions within its remit. Impact Ofgem will have the right framework, flexibility and guidance to take impactful decisions and regulate more effectively to deliver against both short and long-term strategic priorities. It will be better able to take decisions in a clear and transparent way, providing more regulatory certainty for industry and investors. Outcome 2: A clearly defined system and remit Reform The energy system value chain - roles and responsibilities Ofgem ’s current regulatory remit encompasses companies involved in the generation, transmission, distribution, and supply of energy. It also regulates gas shippers, system operators/planners, and smart meters. Ofgem ’s primary regulatory tool is the licensing framework, where it issues licences to companies which set the conditions they must meet (for example, through the gas supplier licence, the electricity generation licence). Reflecting that the energy market has evolved significantly, Ofgem ’s mandate has increased over the years as it has been appointed the regulator, for example, for heat networks, smart and secure energy systems, and hydrogen. The government has also made proposals to extend this further, for example, by making Ofgem the regulator for Third Party Intermediaries ( TPIs ) such as energy brokers in the retail energy market. Currently, Ofgem ’s remit is set out in primary legislation, and amendments require further primary legislation, which is slow and inflexible to deliver. Meanwhile, new actors and services are entering the market, creating potential further gaps in regulatory coverage. A clear theme emerged throughout the review process that Ofgem ’s regulatory remit had not kept pace with an energy market which had evolved quickly. The review identified issues such as: new products being offered to consumers, with unclear regulatory requirements unclear boundaries between regulatory bodies acting within the energy system, with stakeholders noting that there were both overlapping and underlapping responsibilities an unresponsive legislative framework, meaning the process to designate Ofgem as the regulator was slow, even where there is consensus in favour of this (for example, regulating TPIs ) [footnote 21] While CfE respondents expressed a range of views on Ofgem ’s remit, there was a recurring theme that a clearer articulation of its responsibilities would enhance its effectiveness. A system-wide regulatory model is now needed to ensure coherent oversight, protect consumers and support strategic reforms, and to future-proof Ofgem ’s regulatory remit. To ensure that Ofgem ’s regulatory boundaries remain up to date, they should be able to cover the full range of activities taking place within the energy market. This does not mean that Ofgem should or will introduce new rules or licences for this full range of activities, but it should have the ability to do so should it consider them to be necessary. Doing so would enable Ofgem to operate in a more agile manner, taking a less reactive response to regulation. This would mean that if a customer is consuming an energy service, a business is taking out a contract for a service, or an energy supplier is looking to offer a new, innovative service, they can have greater certainty of the regulator’s role and ability to take action. The boundaries of energy sector regulation and Ofgem ’s oversight will be defined through an Energy System Value Chain ( ESVC ) ( Annex E ). The ESVC is a new policy concept that maps all the activities involved in producing, delivering, and using energy, from generation and infrastructure to consumer services and installation. It provides a framework for defining what could be regulated and would give DESNZ the ability to introduce regulation for those areas following consultation by Ofgem , with such regulation to be conducted by Ofgem . The intention is not that Ofgem would necessarily regulate all of those areas directly: in many we would expect Ofgem to work in concert with other regulatory bodies. However, it would provide a basis for closing any regulatory underlaps and for Ofgem to introduce required new rules more quickly. This does not necessitate immediate new rules or licences from Ofgem , nor does it mean that Ofgem will assume additional responsibility for regulating new areas immediately. In the first instance, Ofgem should work with government and other regulators to identify who the most appropriate body is to regulate a section of the value chain. Figure 1: The Energy System Value Chain –