Ofgem to force UK Electricity retailers to auction off one fifth of supply

March 22, 2011 - PRLog -- Ofgem, the UK regulator for the supply of electricity and natural gas, is acting to reduce the control held by the 'big six' operators in the market. The "Big Six" in question are Centrica, EDF Energy, npower, Scottish Power, Scottish and Southern Energy and E.ON UK, whose power networks in the UK have recently been purchased by US energy company, PPL.

Ofgem concluded that competition is 'stifled' by the complexity of tariff schemes, a lack of transparency on the part of the power companies and aspects of their behaviour. In particular, Ofgem questioned the practice of rapidly increasing prices when costs increase and slowly reducing them when costs fall. The regulator has engaged an independent accountancy practice to review the figures.

The regulator is suggesting a requirement for the big six to sell between one tenth and one fifth of their power generation into the market via a regular compulsory auction. This, it considers, will enable new players to enter the retail market more easily.

In a statement released by Ofgem, the company said "Consumers have told us that energy suppliers' prices are too complicated ... That is why we are planning to sweep away this complexity so suppliers' prices are fully exposed to allow easy price comparisons." Lord Mogg, Ofgem Chairman, explained, "The energy supply companies have eight weeks in which to engage constructively with Ofgem's proposals. If firms frustrate reforms, they risk ending up at the Competition Commission."

The regulator also announced an investigation into Scottish Power due to a "significant" differential in the company's standard tariff versus its direct debit tariff. Ofgem say they are investigating whether similar action is required in the business market.

Author: Lynn Shaw, Analyst

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