Ofgem aims to open up competition in energy market
Under the proposals, British Gas, E.ON, Npower, EDF, SSE and ScottishPower will have to post the prices at which they buy and sell electricity 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.
Ofgem says that forcing the big six to post prices in this way will make wholesale prices clearer for all suppliers in the market. Suppliers who breach these rules will face cash fines.
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.
“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.”
Ann Robinson, director of consumer policy at uSwitch.com, said: “This is exactly the shot in the arm that the competitive market needs if it is to start working effectively for consumers. Today’s move should pave the way for new suppliers to come into the market, creating more choice and competition, which should ultimately translate into lower prices for consumers.
“Greater transparency should also lead to greater consumer confidence and reassurance that the price people are being asked to pay is fair.
“At the moment it is very difficult for anyone to be certain one way or another because forward pricing has been so opaque. These steps should see competition shift up a gear and then we will really be able to see exactly what it can deliver for hard-pressed consumers.”