Opening up the electricity market
Press release
- Publication date
- Industry sector
- Generation and Wholesale Market
We have issued our proposals to open up the electricity market to effective competition, establishing a more level playing field so independent suppliers can compete effectively with the Big Six* suppliers.
Under our proposals, the Big Six 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, while new licence conditions will be backed by our 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. Our 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.”
Our pressure on the industry has already produced results with the Big Six now trading at least 30 per cent 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.
Wholesale power market liqudity: final proposals for a 'Secure and Promote' licence condition
In the Autumn, we intend to publish the statutory consultation on the licence conditions bringing the reforms into effect. It is expected that the changes will be in place early 2014.