Ofgem and Labour clash over new electricity trading rules

Pylon_dsLabour has attacked plans by Ofgem to make the link between energy generators and suppliers more transparent as falling short of what is needed. The energy regulator will force the “big six” energy companies to publish more details of the trading between their generation arms and their units that sell power on to households and businesses.

New trading rules coming into effect on 31 March will also mean that the six largest suppliers and two largest independent generators cannot refuse any reasonable requests by independent suppliers to buy electricity. They must also ensure that they sell electricity to independent suppliers at the market rate, offer a full range of products in forward markets and set up credit arrangements for trading that are reasonable and clear.

In addition, major energy companies will also be required to publish the prices at which they will trade wholesale power up to two years in advance.

Caroline Flint, Labour’s shadow energy secretary, criticised Ofgem’s plans. She said:

“Instead of simply stopping energy companies doing secret trades between the generation and retail parts of their businesses, as Labour has proposed, Ofgem is tinkering around the edges with a whole host of complicated interventions which will be difficult to properly monitor and enforce.

“Our plans will break up the big energy companies, put an end to their secret deals and make tariffs simpler and fairer.”

Richard Lloyd, Executive Director at consumer group Which?, added:

“We have long been calling for greater transparency in our broken energy market and while many of these measures are welcome, they only scratch the surface of the changes needed to bring competition to the market and to make it work for consumers.

“We need action to fix the big six and soon. We want a full competition inquiry so that hard-pressed consumers can be confident that the market works well for them, as well as shareholders, and that the price they pay is fair.”

Ofgem defended its new rules. A spokesperson said:

“For the Labour Party and Which? to dismiss Ofgem’s fundamental reforms is to misunderstand the barriers to competition that we have identified and are tackling.

“In fact Ofgem’s reforms go further than Labour’s proposals for increasing liquidity, which they refer to as a pool. Labour’s proposals only relate to the short-term market, where the big six are already auctioning large volumes of power after pressure from Ofgem.

“Independent suppliers have told us that it is difficult to buy power in the forward markets so they can hedge their position in the same way the Big Six can. That is why Ofgem is requiring the big six to publish the price at which they will trade wholesale power up to two years in advance and to sign-up to rules meaning they must trade fairly with independent suppliers or face fines.

“This will give independent suppliers the access they need to power on the forward markets so they can compete more effectively.”

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