What are the National Grid, Ofgem and the energy price cap?
22 February 2023
Energy prices have certainly been a hot topic for a while now, and it doesn’t look like it’s going to stop any time soon.
With recent hikes on energy prices and the lifting of the energy price cap, references to the National Grid and Ofgem have been widespread. But what are the National Grid and Ofgem, and what do they do?
Here, we’ll have a look at their roles and how they’re important.
What is the National Grid?
Simply put, the National Grid is the UK’s system operator in gas and electricity supplies. The privately-owned company manages the network and distribution of gas and electricity around England, Scotland and Wales.
The National Grid network is just that: it’s a network made up of electricity lines, gas pipelines and storage facilities that stores and distributes electricity all around the UK, ensuring that everyone receives power at home and work.
There are six companies in the UK that are authorised to distribute electricity around the country. These suppliers are called Distribution Network Operators, or DNOs for short.
DNOs take gas and electricity from the National Grid who then transfer this energy onto their paying customers. So, if you’re based in London, the South East or East of England, your DNO is UK Power Networks.
The National Grid also transports high pressure natural gas around the UK via the National Transmission System, which is a network of gas pipelines that supply large units such as power stations and industrial plants. The National Transmission System does not, however, supply gas to domestic connections.
What is Ofgem?
Another important name, Ofgem plays an integral role in our energy costs. Ofgem stands for the Office of Gas and Electricity Markets and is a non-ministerial department.
Ofgem is the UK’s independent energy regulator. Its job is to ensure that energy suppliers don’t over-charge on energy prices. It regulates the monopoly companies that run the gas and electricity networks.
Ofgem controls prices, enforces sanctions on companies who breach any regulations and protects energy consumers from price hikes, unfair treatment and bad practice from energy companies.
It also allows competition and innovation to occur in energy companies, which drives down prices and encourages new and innovative products and services for customers.
Ofgem operates within the UK Parliament’s statutory framework, which sets out policies and legislation such as decarbonisation and renewable energy solutions.
Whilst it does not direct governmental policy, Ofgem does have the power to call out any issues that may arise in current policies and legislation, and it can impose fines and enforcement orders on companies that have breached any laws.
What is the energy price cap?
In February of this year, Ofgem announced that the energy price cap was increasing. Since then, the price cap has been increasing, resulting in a huge hikes in energy bills, which has been dubbed the UK’s energy crisis.
But what is the energy price cap? The energy price cap limits the amount that a supplier can charge its customers for energy. The cap was introduced in January 2019 in response to concerns that people were paying too much for their energy.
Ofgem currently reviews this price cap twice a year. So far, the energy price cap has risen 54% since April 2022*, and is set to increase by another 30% in October**.
Ofgem has also announced that, due to the energy crisis, it is planning to review the energy price cap every 3 months rather than every 6 months. According to the Money Saving Expert**, this could mean that the price cap could increase more frequently.
What does this mean for you?
There’s no two ways about it: energy costs are increasing and we’re all feeling the pinch.
One of the best things you can do is to ensure that your central heating system is working at its best. This way, your heating system will run at maximum efficiency, saving you money on your energy bills.
To have that extra peace of mind, you can also sign up for boiler cover or a service plan for if anything goes wrong with your heating system. You can read more information about this here.
Additionally, if you’re looking to upgrade your home’s heating system, Swale Heating offer renewable solutions that will reduce both your home’s CO2 emissions and energy costs.
What’s more, if you’re in need of a new boiler, you can fill in one of our online quotation forms, which you can find here.
Swale Heating are here for all of your home’s central heating needs. All of our engineers are Gas Safe and MCS registered, and are experts in their field. Contact us today via our website, or call us on 0800 731 3344. Rely on us to keep you warm.
Information sources: