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Energy Act 2010

Summary and Background

73.The regulation of the gas and electricity markets in Great Britain is carried out by Ofgem, the unified regulator established by the Utilities Act 2000. The Secretary of State has some limited functions relating to the regulation of the gas and electricity markets, but the vast majority of functions are exercised by Ofgem. Separate arrangements are in place in Northern Ireland.

74.Ofgem’s key functions are to license activity in the gas and electricity markets; control the charges for and access to the monopoly networks; supervise the numerous industry codes that govern the complex contractual and operational relationships between industry players and act concurrently with the Office of Fair Trading in applying general competition law in the gas and electricity markets.

75.This Part contains a number of provisions relating to the market framework with the intention of ensuring the framework promotes the delivery of secure and low carbon energy supplies whilst continuing to protect consumers.

General duties of the Gas and Electricity Markets Authority and the Secretary of State

76.In carrying out its duties, Ofgem must act according to its objectives as set out in statute. Ofgem has a principal objective to protect the interests of existing and future consumers. Wherever it is appropriate to do so, it must fulfil that principal objective by promoting effective competition. Before this Act the interests of consumers were not defined. Ofgem must also take into account a range of secondary objectives.

77.It is the Government’s view that reducing greenhouse gas emissions (in order to mitigate climate change) and ensuring secure energy supplies are both in the interests of future and existing consumers and should be considered as such by Ofgem when carrying out its functions. The Government does not intend to change Ofgem’s principal objective nor to create multiple principal duties through these provisions, but to ensure that in its interpretation of its existing principal objective of protecting consumers, Ofgem gives due weight to the need to reduce greenhouse gas emissions and ensure security of supply.

78.Competitive solutions may take time to deliver, and the market may create barriers for some groups of consumers so that the promotion of competition may not be the most effective means of protecting their interests. These provisions clarify that Ofgem should consider using alternative types of solution to address the consumer detriment instead of, or alongside, measures to promote competition. Such solutions could include strengthened licence conditions and enforcement action, or other means that would prevent certain types of market behaviours.

79.These clarifications will also apply to those limited functions carried out by Scottish Ministers under the Acts.

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