The regulator says it is “breaking down the barriers” to competition by forcing the country’s biggest providers to reveal their wholesale generation prices to independent suppliers up to two years in advance. It is an attempt to make it easier for smaller energy players, which purchase their energy from the likes of British Gas and E.ON, to re-sell gas and electric on to customers at more competitive rates.
Energy providers will also be required to pass information on to customers about the charges they face. The changes aim to make the “annual statements” of the larger brands more “robust, useful and accessible”, Ofgem adds.
The regulator warns failure to trade fairly under the new measures, which are due to be implemented at the end of March, will result in financial penalties
Smaller energy providers, which have pounced on the mass customer exodus from the country’s biggest providers following last year’s price hikes, are likely to see the changes as an opportunity to broaden their appeal at a time when many customers are actively looking for cheaper deals.
Andrew Wright, chief executive of Ofgem, says the reforms will increase the “almost two million” customers already with independent suppliers.
He adds: “Our rules for a simpler, clearer, fairer energy market are coming into force, meaning that it is getting easier for consumers to pick out the best deals. Now we are also breaking down barriers to competition for new entrant suppliers. 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.
“We also want to ensure that information on revenues, costs and profits of the largest energy suppliers is as clear as possible for consumers. Both of these reforms will help ensure competition bears down as effectively as possible on prices.”
The regulator has come under fire in recent months for not doing more to challenge the dominance of the sector’s biggest providers and improve transparency. Criticisms peaked last September when Labour leader Ed Miliband said he would scrap regulator Ofgem and replace it with “a watchdog with more teeth” if he come into power at the 2015 election.
The reforms will be introduced alongside measures that force suppliers to offer just four tariffs and force them to simplify how prices are communicated.