OFGEM – the British energy market regulator – is today asking for expert industry views on whether the current energy supply market arrangements need to be reformed to boost innovation and competition.
Since privatisation, suppliers have acted as the primary interface between consumers and the energy system.
And since privatisation, the energy supply market has been dominated by the Big Six – soon to be the Big Five – while in Scotland, the Big Two are even more dominant through their additional role as grid operators and electricity generators.
OFGEM believes that this ‘supplier hub’ model has reinforced the dominance enjoyed by large suppliers (aka the Big Six) and has stifled competition in the retail market.
A spokesman for the regulator said: “As we move towards a smarter and more competitive energy system, new technologies and business models offer significant benefits to consumers.
But there is evidence that these current arrangements which underpin the energy supply market could hold back such innovation.
“So we are today calling for energy stakeholders to provide evidence on any barriers to innovation and to share their views about whether the ‘supplier hub’ model needs to be reformed.”
OFGEM itself is under pressure from both the GMB trade union and Oxbridge Prof. Dieter Helm in his ‘Cost of Energy Review’ – both believe that OFGEM has lost too many teeth to be an effect industry watchdog and that it should be put out to grass and/or down-sized.
Dermot Nolan, OFGEM chief executive, commented: “Last month, we warned gas and electricity suppliers not to resist changes to make the market work better for all consumers. My theme was ‘change is coming’.
“This relates just as much to the price caps as it does to new entrants and new technologies that threaten the dominant position that large suppliers still enjoy.
“This ‘supplier hub’ model has reinforced the dominance enjoyed by large suppliers and we think that it has stifled competition in the retail market. This is one of the reasons why so many households remain on poor value deals.
“Since privatisation in the 1990s, the energy market has revolved around suppliers. They buy energy in wholesale markets and sell it to customers and they ‘own’ the relationship with customers through billing, metering and managing complaints.”
See also: Helm Report: The market’s broken and energy prices are too high
15 Nov 2017