This morning’s clampdown by the UK regulator on the country’s big six utilities was unexpectedly hard-hitting.
Apart from the news that the companies may be forced to auction up to 20 per cent of their electricity generation output, there was the harsh tone struck by the regulator’s chief executive, Alistair Buchanan. He said:
Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market.
And then there was one. After Eon announced on Tuesday that it would increase electricity prices by 9 per cent and gas prices by 3 per cent, that leaves only EDF of the big six who have frozen charges over the winter.
The row that has followed runs along the same lines as that which came after British Gas made a similar announcement last year. The company says wholesale energy prices have risen, but won’t go into detail about their purchasing agreements.
Consumer groups and some analysts argue that companies can and should be more flexible with their supplier agreements to take advantage of low prices when they can. They also say that companies are more reluctant to lower prices when wholesale prices fall than they are to raise them when they rise.
It seems consumers’ best chance of being certain they are getting a fair deal is to hope for decisive action from Ofgem when the regulator announces the results of its probe into energy prices.
The UK energy secretary has promised to ensure that industrial-scale solar farms do not swallow up too much of the money dedicated to incentivising small-scale renewables projects.
Answering Energy Source readers’ questions, Chris Huhne said that access to feed-in tariffs could be limited to make sure smaller-scale projects get a fair share.
The £8m fine imposed on National Grid on Thursday means the UK utility has achieved a dubious distinction.
In 2008, it was the subject of the largest penalty ever exacted by Ofgem, the UK regulator (£41.6m for anti-competitive metering – later reduced to £15m by the Court of Appeal). Today, National Grid added the number two spot, receiving the second-biggest fine in Ofgem’s history.
This morning, Ofgem announced it would probe pricing by the big six UK energy companies, amid concerns that profit margins are soaring, with the customer losing out.
Today, the head of UK energy policy at one of those big six, Eon, has urged the company’s rivals to change their business models entirely. Answering Energy Source readers’ questions (posed before the Ofgem investigation was announced), Sara Vaughan said:
Energy companies are going to have to change. Traditionally, energy was all about building big central power stations and working out how best to get that power into people’s homes through a one-way transmission and distribution system.
While those centralised power stations are still going to be part of the future, it’s also clear that things are going to change substantially, with more emphasis placed on relationships with customers, who can take responsibility for their own energy usage for the first time.