Ofgem has put forward plans for ­explicit rules about the use of artificial intelligence in the energy industry, before publishing a formal framework during the summer.

The energy watchdog said the use of AI could improve the management and operation of the energy system but ­algorithms brought the risk of “tacit collusion”, helping companies to ­conspire without any formal agreement or human interaction.

Ofgem said that while its existing powers were “robust enough” to keep a check on the current use of AI by suppliers and generators, the development of more automated decision-making raised the risk of tacit collusion. Algorithms that make decisions on prices would make it harder for the ­regulator to draw clear lines of accountability, ownership and competition in the retail and wholesale markets, generation market and infrastructure.

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Machine learning is being applied for a range of uses, including renewable energy generators forecasting their output. Ministers used a white paper last year to set out five principles to guide regulators across UK industries on how to deal with the risks associated with the development of AI, including ensuring that machine learning does not discriminate unfairly against ­individuals or create unfair market ­outcomes.

Ofgem said a risk-based approach towards regulating AI was more proportionate than setting prescriptive rules.

“Systems containing AI that are ­autonomous, complex and adaptive are more likely to fail,” Ofgem said, and were therefore higher on the axis of risk. The failure of a system containing AI that was used to help ­balance supply and ­demand on the electricity grid could ­result in ­instability and a power outage, and would be considered high or very high risk, the regulator said.

“Rule-based AI, transparent models, and explainable AI” were likely to be ­positioned lower on the risk axis, the watchdog said.

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The government has allocated more than £100 million in funding to support regulators and advance AI research, but only £10 million will be put towards helping regulators develop the skills and training needed to deal with AI in their respective industries.

Akshay Kaul, director-general for ­infrastructure at Ofgem, said: “AI is central to building a smart, digital energy system at the lowest possible cost to bill payers and the public purse. Britain cannot harness AI’s huge potential for net zero, however, without a clear framework to protect ­consumers.”

He added: “We want households and businesses to get the maximum benefit from AI’s many applications in energy, while protecting consumers.”