This is to enhance competition and will ensure independent suppliers can buy wholesale power in the range of products they need more easily. The objectives are:
•Availability of a range of products which support hedging
•Robust reference prices showing how much power would cost in forward markets
•Effective short/near term market
As progress has only been made on the third objective since Ofgem set out its intention to reform the market in March, Ofgem is proposing mandatory auctions to drive open the electricity market and ensure all three objectives are met. These would require the Big Six to sell a range of different products so independent suppliers would be able to hedge their positions more effectively on the forward markets and therefore compete on a more level playing field.
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Ofgem's proposal does not prevent the industry from taking more action to deliver the three objectives.
Senior Partner for Markets Andrew Wright, said: "Since Ofgem announced that the Big Six companies needed to change radically their ways, they have made progress. We have seen pledges to simplify tariffs, moratoriums on door-step sales and now auctioning of power in the short-term market. This is to be welcomed. However, the needs of independent suppliers have not yet been met and this is why Ofgem is proposing to introduce mandatory auctions to force the pace of change and increase transparency.
"Suppliers do not have to wait until the auctions are in place to act. Ofgem has set out clearly the three objectives we want met and energy suppliers now have the chance to take the lead and deliver this increase in liquidity."
(CD)
