Ring fence review: energy networks call for input

Overview

We are seeking views on our proposals to review the energy networks ring fence.

Who should respond

We would like views from individuals and organisations. This includes network companies, energy suppliers, energy generators and system operators. We also welcome responses from consumer bodies, government, regulators, investors, credit rating agencies, consumers and any other stakeholders.

Background

Networks take electricity and gas from pipes, cables, transformers and towers and bring energy to homes and businesses. They connect generators, suppliers, energy users and consumers.

The companies who own and operate these networks are bound by law and regulatory rules. These ensure they maintain pipes and cables that provide stable, secure and safe energy to consumers.

While the protections we have in place have been broadly effective, if an energy network company were to face financial distress it could struggle to provide a basic service. This may lead to consumers experiencing power interruptions, lack of servicing and poor customer service.

In some circumstances, energy bills or standing charges may increase to fund investment, putting consumers at risk.

What is the ring fence?

The term ‘ring fence in this context refers to a set of rules in place to protect the network company from activities of the wider group it is a part of.

Energy network companies must comply with the ring fence conditions as part of their energy licence.

Our duty

We are responsible for monitoring the financial health of energy network companies and making sure they are able to finance their regulated activities.

Our proposed recommendations

We want to strengthen the ring fence by modifying the licence conditions to cover several potential areas of risk.

We are proposing 3 different options that could be chosen and would like to know:

• your views on the issues identified
• if there are any weaknesses that you are aware of
• whether you agree with our options

Before you start

Before you respond, you can read information about the different licences and licence conditions on the Ofgem website. 

The licences subject to this review are the following:

• Electricity Distribution Licence
• Electricity Transmission Licence
• Gas Transporter Licence

Why your views matter

We think it’s important to review the ring fence licence conditions. We want to hear your views on the current arrangements and any ideas for alternative options.

Your responses to this call for input will help us identify areas for improvement and help us shape these conditions for the future.