Ofgem, government regulator for the gas and electricity markets, is to cut costs by 15% in line with its commitment to the HM Treasury, the government department responsible for public finance and economic policies. Accordingly, Ofgem will cut 80 jobs and move from its Thames-side offices to a cheaper London office, Dermot Nolan, chief executive at the energy watchdog said.
"We have committed to the Treasury we will cut our expenditure by 15pc over the next four to five years", Nolan said. In 2015, Ofgem had a budget of about £85m (€111.88m, $124.23m). However, this included its e-serve division, which is now set to be separated as the Treasury wants various regulators including Ofgem to share back-office functions, according to The Telegraph.
Hence, Ofgem will now include only its core regulatory side of business while the e-serve will separately perform its task of administering certain government subsidy schemes. This move will reduce its headcount from 600 to about 500, Nolan explained. While the combined headcount of these two divisions has already been slashed from 1,000 to about 900, in the past, Nolan guesstimated that another 80 staff could be let go. However, he hoped that most of the redundancies would be via "people leaving and not being replaced".
The move comes at a time when Ofgem is embarking on a challenging task of implementing the Competition and Markets Authority's (CMA) reforms to the energy sector. According to CMA's March press release, the non-ministerial UK government department, responsible for strengthening business competition, "has set out a comprehensive and wide-ranging package of remedies to address the problems hindering competition, which it proposes to introduce following the conclusion of its investigation in June."
One of these remedies include "the creation of an Ofgem-controlled database of disengaged customers who have been on a SVT for more than 3 years, which will allow rival suppliers to target their marketing to those customers". Another proposal is to change the system of self-regulation of industry codes so that "Ofgem is in a better position to ensure measures that benefit consumers are introduced promptly".
Nolan confirmed that these tasks will now have to be completed with lesser resources including both headcount and money.