Ofgem to keep letting firms sell to themselves
OFGEM yesterday said it had ruled out the possibility of putting self-supply restrictions on the big six energy firms, despite calls from Labour and independent suppliers to limit the practice.
A spokesperson from the energy regulator told City A.M. that it had no plans to prevent the big six firms – which have both generation and retail arms – from buying their own energy, as it unveiled new plans to boost competition in the market.
“We think a self-supply restriction could easily be skirted by the firms,” said the spokesperson. “Instead, we’re actually putting them under obligation to trade with the smaller suppliers, which they weren’t before.”
Labour and some independent energy firms such as First Utility argue that the big six have an unfair advantage, as they can sell energy to themselves on the forward wholesale market, creating a liquidity squeeze. Ofgem has defended its reforms and said it is tackling the barriers to competition by mandating firms to post forward wholesale prices up to two years in advance, creating more transparency in the market.
It has also ramped up its accounting requirements, demanding the use of an independent auditor and more detailed reporting, in the new rules effective from 31 March.
Energy secretary Ed Davey called the plans “a significant and welcome toughening up of competition in electricity markets”.