July 2013
Featured in this insight: Electricity, Gas, Regulation
Market research reveals six companies dominate British electricity: Research shows that Centrica (British Gas), E.ON, SSE, npower, EDF Energy and ScottishPower currently generate four fifths (80%) of Britain’s electricity and supply around nine tenths (95%) of it to their customers.
Ofgem, the energy regulator, is set to introduce new plans by early 2014, with objectives of increasing competition and ensuring that new entrants can take on the dominance of the six largest energy suppliers. Andrew Wright, Senior Partner for Markets at the Regulator said:
"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".
Currently, the “big six” auction off up to three tenths (30%) of their power in a so called spot market for immediate usage, leading to unpredictable pricing for the smaller independent companies.
Under the new proposals suppliers will have to post prices at which they will buy and sell electricity up to two years in advance and trade fairly with smaller players or face cash penalties. Ofgem is expecting these plans to create a greater price transparency, whilst assisting investors seeking to build new power generation plants in the future.
First Utility, who currently buys just 1% of its electricity on the spot market and has around 180,000 customers, said:
“Ofgem's proposals are a positive move and there is no doubt that independent suppliers will be better off as a result…”
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