A Net Zero "Mandate" for Ofgem?

This week the Government has put forward an amendment to its Energy Security Bill which, according to the Financial Times, will oblige Ofgem (the GB energy regulator) to push for net zero. Welcoming the amendment, Ofgem has described it as "giving the regulator a statutory net zero duty". But how exactly will the amendment work and how well does it match this description?

The amendment

The amendment will apply to the so-called 'principal objective' of Ofgem under the Gas and Electricity Acts. In its Electricity Act incarnation, this is expressed as follows:

"The principal objective [...] is to protect the interests of existing and future consumers in relation to electricity conveyed by distribution systems or transmission systems".

"Those interests of existing and future consumers are their interests taken as a whole, including—

(a) their interests in the reduction of electricity-supply emissions of targeted greenhouse gases;

(b) their interests in the security of the supply of electricity to them; and

(c) their interests in the fulfilment by the Authority, when carrying out its designated regulatory functions, of the designated regulatory objectives" [*].

The amendment will replace the words, "the reduction of electricity-supply emissions of targeted greenhouse gases", with the words, "the Secretary of State’s compliance with the?duties in sections 1 and 4(1)(b) of the Climate Change Act 2008 (net zero target?for 2050 and five-year carbon budgets)”.

A more 'pointed' duty ...

It is certainly fair to say that the amendment will render more precise or specific the language of the principal objective, by replacing the reference to 'reductions in greenhouse gas emissions' as that goal might be generally understood with a reference to the specific 2050 goal enshrined in the Climate Change Act.

... but not a 'prioritised' one?

However, it is also clear that the amendment will not - as the publicity around the amendment might suggest - prioritise or prefer achievement of the 2050 goal over other, potentially competing, factors which form part of the principal objective.

Thus, the 2050 goal will remain only one aspect of the consumer interest which Ofgem are bound to pursue (note the word, "including") and it is only one of three specific aspects of the consumer interest highlighted, including consumers' interests in security of supply ('keeping the lights on').

Implications

One might question whether the description of the amendment as introducing a 'net zero mandate' for Ofgem fairly reflects the underlying reality of the amended statutory language.

This might matter for a couple of reasons. If Ofgem cannot prioritise net zero in the way Ministers might wish due to the statutory language, that could prove awkward from a policy perspective. Conversely, if Ofgem does choose to prioritise net zero despite the statutory language it may face difficulties of a legal variety.

Note

[*] The reference to 'designated regulatory functions' is to certain of the functions prescribed for national electricity regulators by a (now repealed) EU Directive, including, for instance, contributing to the protection of vulnerable customers.