Ofgem cracks down on Big Six energy firms
Tuesday 22 March 2011
The energy regulator Ofgem stepped up efforts to temper the influence of the biggest utilities yesterday by proposing that they auction up to a fifth of their electricity generation output and simplify tariffs that leave customers "bamboozled" by their complexity.
The action comes on the back of an Ofgem review which found that competition in the gas and electricity market was being stifled by "a combination of tariff complexity, poor supplier behaviour and lack of transparency".
Moreover, the study showed that the influence of the "Big Six" utilities – Scottish Power, nPower, EDF Energy, Scottish and Southern Energy, E.ON UK and Centrica's British Gas – over the retail market had not diminished since the regulator's last review in 2008.
Lord Mogg, the regulator's chairman, said the proposals "should force open the electricity and gas markets to ensure the market works effectively for consumers".
"The energy supply companies have eight weeks in which to engage constructively with Ofgem's proposals," he warned. "If firms frustrate reforms, they risk ending up at the Competition Commission."
Ofgem said the clearest example of the continued influence of the big utilities was evidence that "the Big Six have adjusted prices in response for rising costs more quickly than they reduced them when costs fell".
"Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market by making them auction up to 20 per cent of their generation output," Alistair Buchanan, the regulator's chief executive, said.
"This would increase price transparency and make it easier for new players to enter the retail market."
Mr Buchanan added that consumers had told Ofgem that suppliers' prices were "too complicated", leaving them "bamboozled".
"That is why we are planning to sweep away this complexity so suppliers' prices are fully exposed to allow easy price comparisons," he said.
It proposed restricting the number of tariffs for products that have no termination date to one per payment method for domestic customers. Ofgem also proposed the appointment of an independent accounting firm to study accounting disclosures.
The regulator said it was concerned that transparency regarding the way utilities "account for the cost of gas and power in their supply business remains limited by company-specific policies, especially when they supply energy from another part of the same business".
"As a result, we feel that consumers are not provided with sufficient clarify about how retail prices relate to suppliers' costs," the regulator said.
Alongside the industry proposals, Ofgem also announced a new investigation into Scottish Power's standard credit prices and said it was exploring whether similar measures were needed in the non-domestic market.
Responding to the announcement, Scottish Power pledged to co-operated and said it believed its pricing to be "cost reflective and in accordance with Ofgem's guidelines".
The industry has until the beginning of June to help Ofgem to develop its proposals or propose alternative moves.
- 2 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 3 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 4 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 UK weather: Britain braced for snow to replace sun as arctic air mass moves in
Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
Russian hack of President Obama's emails worse than previously admitted
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
UK weather: Britain braced for snow to replace sun as arctic air mass moves in
Nepal earthquake: US Pastor Tony Miano sparks outcry by suggesting Nepalis should convert and not rebuild their 'pagan shrines'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...