Energy regulator Ofgem today published proposals which it says could encourage more certainty for renewable power generation firms looking to enter the energy market.
In a move to break the domination of the “Big Six” energy companies, the the big six suppliers will be obliged to post the prices at which they buy and sell wholesale electricity on power trading platforms up to two years in advance.
They will be then be forced to trade at these prices, or face fines from the regulator.
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.
“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.”
Energy secretary Ed Davey said: “Ofgem’s proposals to increase transparency in the way electricity is traded will give independent generators a foothold in the UK energy market and encourage new players to invest.”
He said the government would use the Energy Bill, which passed its third reading in the House of Commons last week, to force measures to improve energy market liquidity, if industry frustrated Ofgem’s proposals.
Richard Lloyd, executive director of consumer organisation Which? Welcomed the proposals but said more radical action was needed.
He said: “We want Ofgem and the government to conduct a more fundamental review into whether the wholesale energy markets are fit for purpose.
“This should look at whether the structure and dominance of the largest companies is hampering competition in these markets and undermining fair prices for consumers.”
An impact assessment published alongside the proposals said that the measures would cost an initial £4 million and have an ongoing annual cost of £14 million.
It said this would add around 15p to consumers’ bills each year, but that this increase would be offset by increased competition due to the greater certainty provided.
It said that at the moment, “Generators…suffer from the limited availability of robust prices in the market, which provide important signals for investment in new plants
“In the absence of these signals, their ability to compete effectively may be limited.”