Friday 20 December 2013

Ofgem and OFT to conduct energy market competition review

A review into the energy market to see how well competition in the gas and electricity sectors are serving the interests of householders and small businesses has been launched.

Regulator Ofgem, the Office of Fair Trading (OFT) and the Competition and Markets Authority (CMA), a non-Ministerial government department, have published a framework which will be used to produce the first annual review of the market in March next year.

Ofgem and OFT will use the framework to look into the market share of the Big Six suppliers, how vigorously they are competing and how easy it is for new entrants to enter the market and compete against larger companies. It will also be used to look at how well suppliers engage with consumers.

The review will also include evidence on the level of profits at different parts of the supply chain, in both the domestic and small business markets.

The report stated: “At a time when consumers are faced with rising energy prices and many are struggling to pay their bills there are inevitably questions about how effectively the energy market is working.

“Ofgem’s vision of a successful energy market is one where suppliers, including a range of new entrants, compete over time to make better offers to consumers and that empowered and engaged consumers incentivise suppliers to compete with each other to deliver efficient and innovative products and services.”

It added there would be "high levels of customer service, significant switching in response to price changes and different supplier strategies around pricing and customer acquisition".

The CMA, which was formed in October this year, will become the UK’s lead competition and consumer body from April 2014.

Ofgem has given the approval for National Grid to pay businesses for cutting their electricity use and also set contracts with power stations to provide extra reserve power starting next winter.