By Daniel Hunter
Ofgem has today (Wednesday) published final proposals that will give independent energy suppliers a more level playing field to compete against their larger rivals. They will also increase competition between the big six who, together with the suppliers.
Under the proposals, the big six suppliers will have to post the prices at which they buy and sell wholesale electricity on power trading platforms up to two years in advance.
They will be obliged to trade at these prices, which means independent suppliers and generators will have far more opportunities to buy and sell the power they need to compete effectively. Posting prices in this way will make wholesale prices clearer for all firms in the market. The new licence conditions will be backed by Ofgem’s powers to fine companies if they are in breach.
Andrew Wright, Senior Partner for Markets at Ofgem, said: “Our aim is to improve consumer confidence and choice by putting strong pressure on prices through increased competition in the energy market. 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.
“Greater price transparency will assist investors seeking to build new generation plant and help secure supplies for consumers, who are also set to benefit from a simpler, clearer and fairer energy market thanks to our retail market reforms.”
Edward Davey, Secretary of State for Energy and Climate Change, said: "I want our energy market to be as competitive as possible. An increased role and level playing field for independent suppliers and generators is precisely what will help drive the competition that delivers better value for consumers and businesses.
“Independent suppliers will have greater access to the power generated by the Big Six and other large power producers, enabling them to purchase and deliver cheaper energy to consumers.
“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.
“I encourage companies to work with Ofgem to implement these proposals as swiftly as possible. Government stands ready to use the Energy Bill to take necessary measures to improve energy market liquidity should Ofgem’s proposals be delayed or frustrated.”
Ofgem’s pressure on the industry has already produced results with the big six now trading at least 30% of their output in the near-term markets. These proposals will ensure the industry raises its game further by promoting trade in the forward markets.
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