Ipswich: Haven Power welcomes Ofgem plans to increase competition in energy supply market
- Credit: Archant
An independent energy supplier based in Suffolk has welcomed a move by regulator Ofgem to boost competition within the sector.
Britain’s big six energy companies are to face fines unless they open up the electricity market to competition from smaller independent rivals, under proposals by the regulator.
Ofgem outlined a series of measures designed to “break the stranglehold” of the six firms which dominate the UK market, and push down prices for hard-pressed households.
Energy Secretary Ed Davey said the Government was ready to bring in new laws should the new measures be “delayed or frustrated”.
The regulator says it wants to create a more level playing field for independent rivals to buy and sell power. Smaller suppliers include the likes of Co-operative Energy, Ecotricity, Ebico and First Utility.
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Under its plan the big six - British Gas, EDF, E.ON, NPower, Scottish Power and SSE - cannot refuse any reasonable requests from small suppliers to buy electricity.
They have also been told they must sell power to the smaller companies at a fair price and negotiate fairly at all times. The big companies will be given deadlines for acknowledging and responding to requests.
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Ofgem said the rules would also apply to the largest independent power generators, Drax Power and GDF Suez.
In addition, the big six companies will have to post prices at which they will buy and sell power for up to two years in advance.
Antony Badger, head of supplier management at Ipswich-based Haven Power, a specialist supplier of energy to the business sector, said: “We are currently absorbing the full proposal from Ofgem, but would always welcome industry changes that increase electricity market liquidity and encourage new entrants into the market.
“Although we are now an established supplier in the industry, operating for over seven years, we can still relate to the difficulties and frustrations that small independent suppliers face.
“This is particularly evident when trying to buy power to meet their customers’ needs at a price that enables them to compete with the larger suppliers. At Haven Power, we are already providing smaller suppliers with a direct route to the wholesale market and will continue to offer this in the future.
“Providing more choice in the energy industry and encouraging increased competition may result in better prices for customers in the future.”
Ofgem said that while the major companies were selling at least 30% of their output in the market for short-term energy use, there was still not enough trading of power for use in the “forward market” dealing with energy use further ahead.
An obligation to post prices at which they buy power two years in advance would “make it far easier for independent suppliers to buy power for their customers”, Ofgem said.
The proposals come ahead of a statutory consultation this autumn, with the changes expected to come into effect next year.
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.”
The regulator also says the rules on price transparency will help power generator owners decide when to invest in new power stations or carry out maintenance on existing ones.
Mr Davey said: “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.”
Richard Lloyd, executive director of consumer group Which?, said: “Wholesale energy prices account for more than half of the costs of rapidly-rising energy bills, so efforts by Ofgem to make the markets more competitive are welcome.
“But much more radical action is needed to fix the broken energy market and to keep prices in check. We want Ofgem and the Government to conduct a more fundamental review into whether the wholesale energy markets are fit for purpose.
“This should look at whether the structure and dominance of the largest companies is hampering competition in these markets and undermining fair prices for consumers.”