Governing Power: Improving the administration of the energy industry in Great Britain
DECC could save hundreds of millions of pounds and promote more competition and innovation among energy companies by sweeping away swathes of energy quangos at the Spending Review.
A new report by leading think tank Policy Exchange highlights the complex network of organisations that govern energy policy, regulations and rules. The paper find there are over 30 bodies responsible for the delivery of energy policy, the management of industry codes of practice and the operation of the energy system. The cost of these organisations is estimated at over £600 million a year.
It says that these bodies often carry out overlapping functions, adding costs and red tape to energy companies. The report says that a vertically integrated energy company could be bound by in the order of 10,000 pages of code regulations, governed by a mass of different organisations.
The sheer complexity of the system means that energy companies are now employing hundreds of people in their policy, regulatory and government affairs teams. This cost acts an obstacle for new energy companies looking to enter the market with new and innovative products to help households already struggling to pay their gas and electricity bills.
The paper says that the various administrative bodies should be reorganised around the following three areas:
- An Energy Delivery Body – The functions of at least 10 organisations currently involved in the delivery of renewable energy and energy efficiency policies should be rationalised into a single organisation.
- An Industry Codes Body – There are currently 6 organisations – including National Grid and the Energy Networks Association – involved in managing the 11 industry codes which govern how markets operate. Replacing this with a single body would reduce complexity and cost, and improve consistency.
- An Independent Systems Operator – Responsibility for managing system operation and security of supply is currently split between 5 bodies. The creation of an Independent Systems Operator would create clearer accountability for system operation and ensuring security of supply. This option should be considered further by Government.