Ofgem has proposed new rules that would lead to UK consumers saving £5 billion on energy bills over five years.

The Office of Gas and Electricity Markets (Ofgem) has announced a proposal to input strict price controls on energy costs. The proposals will lead to £15-£25 in savings per year for household consumers and 5 billion over five years. The new change will come into force in 2021 and will significantly reduce the profits energy network companies receive. .

Since the hard Christmas last year, retailers have been suffering from disinterested consumers. Households have been continuously squeezed by a range of economic conditions, from interest rates to inflationary pressure, and as a result, budgets have tightened. Once this new proposal is launched, households could see themselves with a bit more cash to play around with, leaving an opening in the budget for retailers and small businesses. Until then, however, businesses should not neglect their cash flow, and credit managers are on hand to provide your business with the financial freedom to offset this spending slowdown.

Ofgem is insistent that the new initiative is more in line with the consumer’s needs, and urges network companies to start consulting with consumers about their business plans, to ensure that they are in line with what consumers want and are willing to pay for.

Ofgem is able to drive forward a tougher regulatory framework for the next price control thanks to a stable, predictable and low risk regulatory regime which ensures consumers benefit from high levels of investment and innovation at the lowest cost. This regime has already delivered significant benefits.

Since 1990, network companies have invested around £100 billion in the national and local grids, operating one of the most reliable networks in Europe. Power cuts have almost halved since 2001, while customer satisfaction with local networks has improved significantly. Under our price controls, the cost of transporting a unit of electricity around Britain has fallen by 17% since the mid 1990s, relative to the retail price index.

Networks must step up their use of innovation even further to maintain high levels of reliability while enabling support for new technologies such as electric vehicles, electricity storage, and local renewable generation.

Jonathan Brearley, Ofgem’s senior partner for networks, said “The energy sector is rapidly changing and consumers must be confident they continue to get good value for money for the services the networks deliver. Ofgem’s stable regulatory regime allows companies to attract investment from around the world on behalf of consumers in Great Britain at the lowest cost. We will capitalise on this by getting network companies to work harder to deliver better value for consumers in the next price controls. This will mean lower costs for consumers of £15 – £25 per year on bills and lower returns for companies.”

Stakeholders have until May 2 to respond to the proposals. Ofgem will finalise the framework for setting the next price controls in summer 2018. The companies will submit business plans by autumn 2019. Ofgem’s final view on price control allowances will be published by the end of 2020.


Gillian Guy, Chief Executive of Citizens Advice, said “Today’s announcement is a major step forward. These proposals should prevent a repeat of the billions in excess profits energy network companies are making under the current price controls. This means better value for consumers and potentially lower bills. The outcome of this consultation will be the acid test for Ofgem. It’s crucial that the regulator holds its nerve and sees through these changes.”

“Curbing the ability of energy network companies to make excessive profits, limiting the price control to five years, and ensuring a greater voice for consumers are all measures that should take us closer to a towards an energy market that genuinely works for consumers.”

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