The U.K. power regulator Wednesday announced new rules to encourage more competition and transparency in electricity markets and break the "stranglehold" that the six biggest firms currently have over pricing and retail.
The U.K. power regulator Wednesday announced new rules to encourage more competition and transparency in electricity markets and break the "stranglehold" that the six biggest firms currently have over pricing and retail.
In a statement the Office of the Gas and Electricity Markets, Ofgem, said it
wanted to create "a more level playing field," in which smaller
electricity companies would be able to compete more easily with the "big
six" suppliers - Centrica PLC, Electricite de France SA, E.ON UK, RWE
Npower, Scottish Power and SSE PLC.
Under the reforms, large energy suppliers will be required to publish wholesale
energy prices two years in advance. This will provide guarantees for smaller
companies wishing to buy or sell energy in the future, Ofgem said, encouraging
more investment in building new generating capacity.
The big six suppliers and the two largest independent power generators, Drax
Power Ltd. and GDF Suez Energy UK, will also be compelled to sell electricity
to smaller suppliers at a "fair price." They also won't be allowed to
refuse "any reasonable requests" by smaller suppliers to buy
electricity.
The move toward posted wholesale prices will address insufficient forward
trading in electricity markets, Ofgem said. Currently a lack of trading in
forward wholesale power has meant there has been little progress on development
of trusted reference prices - the signals that power generators need to see so
they can decide when to invest in building new power stations, or carrying out
maintenance on existing ones, the statement said.
"Ofgem's proposals will break the stranglehold of the big six in the
retail market and create a more level playing field for independent suppliers,
who will get a fair deal when they want to buy and sell power up to two years
ahead," said Andrew Wright, senior partner for markets at Ofgem, in the
statement.
Edward Davey, Secretary of State for Energy and Climate Change, said that
greater competition and transparency would lead to lower consumer prices. He added:
"Ofgem's proposals to increase transparency in the way electricity is
traded will give independent generators a foothold in the UK energy market and
encourage new players to invest."
Ofgem will have the power to enforce the changes by fining companies that fail
to follow the rules, according to Wednesday's statement, which also said that
changes are due to come into force in 2014.
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