Big energy companies face new rules on prices and profits

Energy regulator Ofgem has ordered the big players in the energy market to be more transparent or face fines.

Energy regulator Ofgem has announced new rules which it says will make the electricity market more competitive and establish a truer picture of the big companies’ activities.

From 31st March, the Big Six energy companies (British Gas, EDF, E.On, npower, Scottish Power and SSE) and the two largest independent energy generating companies will have to adopt new trading rules.

These include selling electricity to independent suppliers at market rate, meeting deadlines for responding to requests to buy electricity, and offering clear and reasonable credit agreements.

Every day they will also have to publish the price at which they will trade wholesale power up to two years in advance.

If they don’t comply, they will face fines.

There has long been controversy about the big companies having both a generation arm and a supply arm, and the advantage this gives them.

See if you can switch energy supplier and save

Profits under the microscope

Ofgem is also introducing new rules that require the Big Six to provide annual statements more quickly, and provide more information on their costs, revenues and profits. These will also have to be independently audited and be easily comparable.

In a bullish statement, Ofgem CEO Andrew Wright said: “These reforms give independent suppliers, generators and new entrants to the market, both the visibility of prices and opportunities to trade that they need to compete with the largest energy suppliers. Almost two million customers are with independent suppliers, and we expect these reforms to help these suppliers and any new entrants to grow.

“No other European regulator has gone as far as Ofgem in making this information accessible for consumers. Now we are taking further steps to ensure that it is published more quickly, and that it gives a robust, useful and accessible picture of company profits. Both of these reforms will help ensure competition bears down as effectively as possible on prices.”

Another review on its way

Ofgem says it is continuing to investigate the energy market in conjunction with the Competition and Markets Authority (CMA) and the Office of Fair Trading and will publish its findings at the end of March. Earlier this month, Energy Secretary Ed Davey wrote to Ofgem and the CMA to ask them to look at the link between British Gas's share of the gas market and its profits.

Consumer champion Which? is calling for a full competition enquiry. Meanwhile, Labour has reiterated its plans to freeze energy bills and break up the big energy companies if it is elected next year.

See if you can switch energy supplier and save

More on energy:

Price cuts mean Ovo now boasts the cheapest energy tariff

Customer satisfaction with energy providers hits a new low

Energy price rises and cuts in full