Following extensive recent investigations into the “big six” energy firms and their pricing policies, they have now been told to trade in a fair and competitive way that allows smaller companies to compete and new suppliers to get involved in the energy market. If they fail to do so, they could potentially face significant fines.
Under the new plans from regulator Ofgem, the big six energy suppliers will have to publish their wholesale prices. This will be done two years in advance, and should help ensure openness and honesty in their pricing structures. It will also make things easier for smaller companies who wish to re-sell wholesale energy to either domestic or commercial markets.
These prices shall be published daily, and there shall be two windows in the day, each an hour long, in which this must be done. The result is that small suppliers will be able to buy wholesale power in advance, and do so in a more economical way.
According to Ofgem’s Chief Executive Andrew Wright, “Almost two million customers are with independent suppliers, and we expect these reforms to help these suppliers and any new entrants to grow.”
This could result in noticeable savings both for small suppliers and for household users, according to Darren Braham. Braham, of independent supplier First Utility, says that the big six currently use methods to inflate wholesale prices. The result is an increase in costs for small suppliers, and a corresponding increase in home energy bills.
“First Utility’s analysis suggests that this increases costs by approximately £30 per household per year,” says Braham. “If the industry were changed, these reduced costs could be passed on to customers equating to UK wide savings of almost £1bn from energy bills,”
On top of this, the big six suppliers will now have to provide Ofgem with full account audits and more detailed information about their trading practices. This is designed to ensure that trading practices are fair and that bills are not being unduly increased.
However, according to consumer group Which?, who have been among those calling for investigation into energy firms, these new methods of regulating the energy market have simply “scratched the surface” of the issues at hand. Richard Lloyd, Executive Director of Which, has said: “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.”
The new rules will take effect at the end of March this year.