But ‘small’ generation companies fear this will effectively force anyone buying electricity produced locally to pay for the cost of the national grid, even if the power has never been on the transmission system.
The Flexible Generation Group have demanded that OFGEM delays its decision in light of the political uncertainty surrounding the British general election result.
The smaller generators that make up the Flexible Generation Group started to spring up five years ago, in response to renewable energy taking up a greater slice of the UK energy market. They include Alkane Energy, Eider Reserve Power, Oxford Capital, PeakGen Power and Welsh Power.
Mark Draper, Chairman of the Flexible Generation Group, said: “A decision of this magnitude -which has such far-reaching consequences for how energy charges are levied and how competition in the market is developed – should not be made in the immediate aftermath of a general election.
“A decision just one week after the country goes to the polls, with public attention focused on the formation of a new government, the implications of the result and possibly the appointment of a new Secretary of State, risks being viewed as a deliberate attempt by OFGEM to present the new administration with a decision before assessing it against the broader policy background.
“No decision should be taken before OFGEM has time to discuss with the new administration the impacts of the policy on wider energy objectives.
“The timing of the expected decision risks reinforcing in the minds of many that the large power generators wield excessive and undue influence within OFGEM’s regulatory processes.”
The Flexible Generation Group, which represents the UK’s fast-growing, small scale, flexible power generation industry, have already accused the Big Six electricity generators of “acting like the mafia” and “ganging up” against smaller competitors.
They say that the major players are using “undue influence” within the OFGEM processes to regulate the energy market in their favour, and that the proposed ruling would “decimate” their growing industry.
The decision makers on OFGEM’s Connection and Use of System Code (CUSC) panel overwhelmingly represent large incumbent companies, including EdF, SSE, Scottish Power and Uniper, which will benefit from what is being proposed. It is their recommendations which OFGEM’s board has said it is “minded to” accept in its ruling.
The small new entrants have no representation on the panel which has made the recommendations, despite requests to have their voices heard and interests represented.
The Flexible Generation Group believe OFGEM’s current governance structures give large energy firms undue influence over the reform process and changes in regulation, making it more difficult for new market entrants to compete, increasing prices to consumers and threatening security of supply.
FGG members own and operate approximately 800 MW of generation on the UK electricity system which has been ‘put in jeopardy’ by OFGEM’s impending decision. Draper told the regulator that his group estimates the “uncertainty OFGEM has created has already halted the construction of generators and is deterring investment, pushing up prices, making future projects more expensive to finance and risking security of supply”
“These small-scale generators play a critical role in rapidly providing rapid quantities of power when there are short-term periods of low renewable production – particularly from wind and solar power.
“At present, they are delivering the lowest cost new generation capacity to Britain – and efficiently provide fast and flexible services to the grid. But the Big Six regard these new players as a serious threat to their longer-term market dominance.”