Collaboration overview: Energy companies' IT plans are often viewed as ‘black boxes’, which hinders regulators from holding them accountable and making informed funding decisions. We developed regulatory guidelines to improve information quality and help regulate IT investments. Collaboration with our team helps drive factual decision-making around IT investments in the energy sector. Energy regulator faces an IT ‘black box’ challenge The Office of Gas and Electricity Markets (Ofgem) is Great Britain’s independent energy regulator. It is a non-ministerial department that regulates monopolies which run the gas and electricity networks, as well as makes decisions on price controls and enforcement. The ESO is the Electricity System Operator and the only company in the country keeping Great Britain’s electricity grid in balance and ensuring supply meets demand every single day. As the ESO does not face any direct competition, Ofgem is responsible for reviewing its work and plans, as well as deciding how much money the ESO can collect in exchange for its electricity system balancing services. At the time, the ESO was spending hundreds of millions per year on IT costs. Ofgem needed to ensure that this money was being spent efficiently and delivering the right services at the best value. Having very few IT specialists in-house, Ofgem commissioned our team of energy experts and data professionals to assess the ESO’s IT investment programme and advise Ofgem on the design of its regulation on IT spending. Drafting a regulatory guidance document Ofgem’s team already knew that the Technology Business Management (TBM) Taxonomy tool would be valuable for assessing ESO’s IT investment programme. So, we made sure to rely on it for this project. TBM Taxonomy is a discipline that improves business outcomes by giving organisations a consistent way to translate technology investments into business value. It helps organisations react quickly to changing market dynamics, make data-driven decisions, and align around a common business objective. We started by running workshops with Ofgem and the ESO, explaining the TBM Taxonomy and how we planned to use it. This allowed us to establish clarity around the kind of information we expected the ESO to submit and gave their team an opportunity to provide feedback so that we could improve our proposed strategy. Next, we used the TBM Taxonomy to produce a guidance document that: Defined the information architecture for the ESO to use when submitting data about its business plan for Ofgem’s assessment. Developed a data model for the implementation of the information architecture, helping Ofgem assess the efficiency of the ESO’s proposed spending and make informed price control decisions. Enabled Ofgem to benchmark the ESO’s performance against compliance obligations and service expectations, streamlining the cost assessment process. The document was published as a regulatory consultation, without Ofgem making any changes to it. Assessing the ESO’s IT investment plan Lastly, we conducted an independent review of the ESO’s £556 million IT investment plan, using the newly outlined requirements of the regulatory guidance document. We used the RAG (red, amber, green) rating to illustrate the findings around each of ESO’s IT investments. A project was rated as red if our experts found significant concerns, amber if there were some concerns, and green if there were no concerns. After conducting the assessment, we scored 13 investments as red, totalling £307 million (55% of planned IT spend), 13 investments as amber, totalling £210 million (38% of planned IT spend), and 7 investments as green, totalling £38 million (7% of planned IT spend). Read our full findings on Ofgem's website Collaboration impact Our collaboration with Ofgem has helped the organisation improve the quality of information that it collects. This has allowed the regulator to effectively review the ESO’s plans and make informed decisions around funding, based on facts. Ofgem now benefits from a modern method for assessing the IT investment plans of the licensed entities under its responsibility for economic and consumer protection. Our method of describing the IT enterprise estate as a machine-readable data model that complies with the TBM Taxonomy has enabled advanced analysis. Through the development of regulatory guidance based on this method, we have provided Ofgem with a reusable template for regulating IT investments across other companies under its jurisdiction. 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