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Citizens Advice response to the Ofgem Future of local energy institutions and governance consultation

17 May 2023

Citizens Advice response to the Ofgem Future of local energy institutions and governance consultation [ 150 kb]

We support the proposals for a new Regional System Planner (RSP) role and a new single and neutral market facilitator role. We believe that there will be benefits for consumers in clarifying energy system planning responsibilities and in enabling a deeper flexibility market more rapidly. 

Regional System Planner

We have the following comments on its development and implementation.

The RSP body will need to be given a clear direction as to its priorities. For instance, whether alignment should be to meet net zero goals as rapidly as possible, or to deliver net zero goals at least cost. The direction should align with other bodies such as Ofgem’s.

There is a need for clear governance and accountability arrangements to ensure that key stakeholders such as devolved and local governments have a means to be heard and their views taken on board. The democratic mandate of such bodies needs to be appreciated in energy system planning.

There is a risk of duplication of activity in energy system planning between the RSP body and other organisations such as local and devolved governments, and network companies. Duplication will create additional costs for consumers and potential conflicts over system planning and outcomes. This risk needs to be addressed when designing the RSP’s responsibilities and governance arrangements.

Market facilitator role

There appears to be limited analysis of the transitional arrangements from the current work of the Energy Networks Association (ENA) Open Networks project to the new market facilitator body. We believe that there is a need to reform the Open Networks project to enable a smooth and efficient transition to the new body to reduce the risk of a hiatus in progress to developing the flexibility market. Reform elements will need to ensure that stakeholders can input to change processes and effectively hold the transitional body (Open Networks) to account for delivery of key tasks (e.g. standardisation of market design products, platforms, contracts, payment and dispatch arrangements and the deepening and widening of the flexibility market).

Governance and change processes for the new market facilitator body need to be clarified and open to further consultation. It will be important for all market participants and other key stakeholders such as consumer representation bodies to be able to influence development of the market and have a means to hold the market facilitator body to account.

Mitigants should be explored to address the risks of potential conflicts from having the Future System Operator (FSO) as the body undertaking the market facilitator role. We have suggested such mitigants within the responses to the questions below.

It is proposed that the Distribution Network Operator (DNO) role and the Distribution System Operation (DSO) operational activities will remain within a DNO’s remit rather than separating them. There are clear risks of conflict in these roles and it will be important to ensure that the mitigant protections put in place in the RIIO-ED2 price control are effective. Ofgem should monitor the UK Power Networks (UKPN) imminent separation of its DSO functions to assess costs and benefits of such a split and whether separation is valuable for the whole sector.