The "Big Six" energy suppliers have been told to sell off up to 20 per cent of their electricity generation output or face the Competition Commission.
Energy regulator
Ofgem is proposing the auction as part of a radical overhaul it says is necessary to secure the massive
investment required over the next decade to secure Britain’s energy supplies and combat climate change. The reforms, said Ofgem, would "force open" the
electricity market and make it easier for new players to enter, at the same time as make the
Big Six simplify their tariffs so consumers could compare prices more easily.
"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. This would increase price transparency and make it easier for new players to enter the retail market," said Ofgem chief executive Alistair Buchanan.
Low carbon investmentThe reform is necessary, says the watchdog, to restore consumer trust in the energy market, which is going to require around £200 billion of new investment over the next decade to upgrade its ageing infrastructure to make it fit for a low carbon future.
"Consumers must have confidence that energy companies are playing fair at a time when they are being asked to foot the £200 billion bill to pay for the investment Britain needs to ensure secure and sustainable energy supplies," said Buchanan.
Ofgem review
The reforms are being proposed following a review launched at the end of last year by Ofgem, which found price hikes had seen suppliers' profit margins soar by 38 per cent.
Ofgem is concerned because the influence the Big Six assert on the retail market has not diminished since its 2008 probe, which was unable to find evidence of anti-competitive behaviour.
This time around, the watchdog says it has found evidence the Bix Six have adjusted prices "in response to rising costs more quickly than they reduced them when costs fell".
It is calling on the energy companies to comply with the reforms within eight weeks or face a referral to the Competition Commission.
"If firms frustrate reforms they risk ending up at the Competition Commission," said Ofgem’s chairman Lord Mogg.
Review into non-domestic market
Today, Ofgem also launched a review into whether energy companies are frustrating switching in the non-domestic market and an additional investigation into Scottish Power's standard credit prices.
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