Policy paper

Economic regulation policy

This policy paper sets out the government’s vision for modernising the economic regulation of the utilities sectors.

From:: Department for Business, Energy & Industrial Strategy
Published: 31 January 2022
Last updated: 17 January 2023 — See all updates

Documents

Economic regulation policy paper (PDF)

PDF, 384 KB, 26 pages

Economic regulation policy paper (accessible webpage - HTML)

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Details

Update: 17 January 2023

The review of economic regulation announced in the January 2022 policy paper is under way.

As the original paper set out, the review will look into the economic regulation of the energy, water and telecoms sectors, including:

regulators’ duties
how regulators can enhance competition and innovation
how respective regulatory appeals processes work

In addition, it will now also consider:

how to encourage greater investment
how to enhance the consumer experience in these sectors

We will engage with government departments, regulators, academics, businesses and other interested parties over the coming months to help inform policy proposals. If you would like to be involved in the review, please email economic.regulation@beis.gov.uk.

We will also hold an open consultation on the proposals in spring 2023 to seek any further views.

This paper is about the future of economic regulation of the water, energy, and telecoms sectors in the UK. It follows a commitment in the government’s National Infrastructure Strategy to produce an overarching policy paper in this area.

The government agreed with the National Infrastructure Commission’s recommendation that, though the UK’s regulatory framework has delivered significant benefits, it needs updating and strengthening as it is increasingly facing emerging and long-term challenges that it was not designed to address.

The paper covers the following areas:

how the government intends to ensure that the regulators’ duties will allow them to meet these systemic challenges, conducting a review of duties
how the government will provide strategic clarity on our long-term aims for these sectors, publishing a letter of strategic guidance to the CEOs of Ofwat, Ofgem and Ofcom
how competition for strategic investment opportunities can be enhanced for the long-term benefit of consumers and investors
how transparency and consistency in key processes can be improved, in particular seeking greater consistency, and working towards a common methodology, where appropriate, for the weighted average cost of capital when setting price controls

The paper is the first step to updating our model of economic regulation. We will launch a consultation setting out more detail on a package of measures to ensure the UK model of economic regulation fits the needs of the modern age.