Ofgem proposes overhaul of U.K. energy market to benefit consumers


Lord Mogg,
London, U.K. — (METERING.COM) — March 23, 2011 – Britain’s regulator Ofgem has proposed sweeping changes to the energy market on the back of a finding that competition is being stifled by a combination of tariff complexity, poor supplier behavior, and lack of transparency.

Further, Ofgem found that the degree of influence of the “big six” on the retail market has not diminished since a 2008 probe, the clearest example being the finding that for the first time there is evidence that the companies have adjusted prices in response to rising costs more quickly than they reduced them when costs fell.

In particular Ofgem is proposing five reforms:

  • Price simplification, by restricting the number of tariffs for standard evergreen products from each supplier to just one per payment method in relation to domestic customers
  • Breaking the power of the “big six” over the wholesale electricity market by requiring the companies to auction up to 20 percent of their power output into the market
  • Tougher enforcement and more requirements to ensure companies play straight with consumers
  • Reducing unfair contracting by ensuring compliance with existing license conditions and considering whether further license amendments are needed
  • Improving accounting transparency with an investigation in how this may be done by an independent accounting firm.

At the same time Ofgem also announced a new investigation into Scottish Power’s standard credit prices, and is exploring whether it needs to bring similar actions in the non domestic market, with the concern that switching is being frustrated. This is in addition to an ongoing investigation into the handling of consumers’ complaints by British Gas, EDF Energy and npower and investigations on misspelling by EDF Energy, npower, Scottish Power, and Scottish and Southern Energy.

“Ofgem’s proposals should force open the electricity and gas markets to ensure the market works effectively for consumers,” said Ofgem’s chairman Lord Mogg. “This is a holistic package of changes. We will also discuss with government if we believe our consumer protection powers need reinforcement.”

The proposals are open for consultation to June 1, and Ofgem has warned that energy supply companies that frustrate the reforms risk ending up at the Competition Commission.