Ofgem’s liquidity project seeks to ensure that the wholesale electricity market supports effective competition, delivering benefits to consumers in terms of downward pressure on bills, greater choice and better service. We are concerned that poor liquidity in the wholesale electricity market is posing a barrier to effective competition, thereby preventing consumers from fully realising the benefits of competition. While we have seen some recent improvements, particularly in near-term markets, this progress has been insufficient. As such, we intend to intervene in the market to improve liquidity.
We are proposing to introduce a new special licence condition into the generation licences of the eight largest electricity generating companies – Centrica, Drax, EDF Energy, E.On, GDF Suez, RWE npower, SSE, and ScottishPower. The licence condition aims to improve access to the wholesale electricity market by requiring these companies to follow a set of ‘Supplier Market Access’ rules when trading with small independent suppliers. It also aims to ensure that the market provides the products and price signals needed to compete effectively through a market making obligation on the six largest vertically integrated companies – Centrica, EDF Energy, E.On, RWE npower, SSE and ScottishPower.
We received a number of responses to policy proposals we consulted on in June and these have informed our final policy design. We have drawn up a draft licence condition to implement our policy. We are seeking views from interested parties about whether the draft licence condition reflects our final policy design. Subject to these responses, we will make the necessary changes to licences in early 2014.