Updated: Ofgem rolls out plans to tackle Big Six market dominance

Energy watchdog Ofgem has unveiled a new 'roadmap' of reforms as part of a drive to increase competition and tackle the electricity market dominance held by the Big Six.

According to Ofgem, the roadmap for liquidity reforms, which launched yesterday (February 22), sets out a detailed plan to “open up the wholesale electricity market” by setting out three clear objectives the Big Six energy suppliers will have to meet.

It is anticipated the reforms will “enhance competition and will ensure independent suppliers can buy wholesale power in the range of products they need more easily”, and follows a pledge by Ofgem to reform the market in March last year, by breaking up the “monopoly” of the Big Six.

However, while independent energy supplier Ecotricity welcomed the plans it questioned why it had not been implemented sooner and called for an energy industry “properly regulated in the interest of Britain”.

Ecotricity founder Dale Vince, told edieEnergy: “The electricity market has been open to competition from independents for nearly 20 years, so while we welcome the move and hope it improves things, we have to wonder why it’s taken Ofgem so long to act.

“But the real problems we should be focusing on are their lack of investment in green energy, the range of confusing tariffs they offer and the fact energy company profits are being shipped out of the country.”

Ofgem is also proposing mandatory auctions to “drive open” the market and ensure its three objectives are met. These include; increasing the range of power products which support hedging, the introduction of robust reference prices and a more effective near-term trading market.

Independent power station developer Carlton Power director Mike Benson also agreed the move was welcome, but warned that independent companies will also need to “look closely at the detail to be certain that the measures proposed will actually deliver greater competition and transparency, and crucially new investment”.

This, he said would play a part in breaking the “stranglehold of the Big Six”, adding that “the market needs liquidity in both supply and generation to have any impact upon the Big Six and to create a genuine competitive market”.

Ofgem senior partner for market Andrew Wright, said: “Since Ofgem announced that the Big Six companies needed to change radically their ways, they have made progress. We have seen pledges to simplify tariffs, moratoriums on door-step sales and now auctioning of power in the short-term market. This is to be welcomed.

“However, the needs of independent suppliers have not yet been met and this is why Ofgem is proposing to introduce mandatory auctions to force the pace of change and increase transparency.”

The reform proposals have been welcomed by the energy secretary Ed Davey, who said: “Consumers will get the best deals when suppliers face tough competition and that is what both Government and regulator are working to achieve. Right now only six big companies have 99% of domestic customers – energy bill payers in this country need more and better choices.

“We’ve cut red tape for small suppliers to give them a leg up into the market, and we are also working with the Ofgem to deliver clearer bills and simpler tariffs. We have strengthened Ofgem’s own hand by making it harder for energy companies to block licence changes, and we are looking at beefing up Ofgem’s powers further to ensure fairer outcomes for consumers.”

Carys Matthews

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