The spin off of Ofgem’s ‘E-serve’ arm is likely to happen in 2018, “notionally in April”, Luke Hargreaves, head of renewables at the regulator’s administration body, told an Energy Institute meeting. He said he expected more information about the split in the government’s Autumn Statement, due in November. Ofgem said the timetable for any change was still to be decided.

Ofgem’s E-serve body provides administration and services for a raft of government programmes, including the Renewables Obligation and Feed-in Tariff schemes.

Hargreaves said the first step was ‘autonomy’: putting corporate structures in place so that E-Serve will operate as a organisation separate from Ofgem. That process is under way now. How it might be spun out is not clear, but commentators have suggested options like a “GovCo”, as has been used for the Low Carbon Contracts Company, are on the table.

Unwinding E-Serve from Ofgem is not straightforward: the organisation was nominally set up around a decade ago to bring together tasks that had been placed on the regulator (in fact the Gas and Electricity Markets Authority) in primary legislation. That means the spin-off will require changes in law, but time is pressing for civil servants who are just completing the transfer from DECC to BEIS and will have soon have to deal with the requirements of Brexit.

What is more, the scope of Ofgem’s regulatory activities is also currently being re-examined. That is being done partly through the UK Regulators’ Network, a group of  13 sectoral regulators whose work includes finding ways for the bodies to share resources and work together.

High on the list for planning the E-serve spin-off is IT. New Power understands that there is little connection between the various schemes E-serve administers, with participants registered differently for each.

“We have millions of transactions each month and these systems have to be rewritten,” Hargreaves said. Ofgem said he was referring to the FIT and RO schemes. The system has to be robust: he noted that in 2027 the Renewables Obligation, will be converted into a fixed price certificates scheme. At that point E-Serve will be undertaking what is effectively a levy collection process and that programme alone could be “around £5 billion a year,” he said.

There are immediate practical issues too. Ofgem is due to move from its Millbank offices in October 2017 and it is not clear whether it and E-serve will move together.

Whatever the future structure of E-serve, it will see activity in some of its programmes fall off in future. At the moment it has periods of ‘boom and bust’ to manage as developers rush to deliver new schemes in advance of the RO closure or step-changes in FITs. But the spun-off body will have to have new powers to compete for other work against other companies. Hargreaves said in future, the reconstituted organisation, “can’t rely on government to give us work”.

 

Further reading:

E-Serve spin-off planned for autumn

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