Offgem ditches electricity and gas retail price controls in the UK

UK power regulator Ofgem today announced proposals to scrap price controls for electricity and gas supply in the UK, claiming that sufficient competition now existed within the market for all consumers to obtain power at fair prices.

Ofgem’s chief executive, Callum McCarthy said, “This decision heralds the future of regulation for these markets. As the markets have become more and more competitive, there has been less justification for price controls”.

The announcement follows the recommendations arising from the latest round of market research carried out by MORI on behalf of Ofgem, which showed that competition was well established. The MORI research found that 38 per cent of all electricity consumers have switched supplier with 37 per cent of gas users having also moved.

Consumer watchdog organization, Energy Watch has criticized the move to lift all remaining domestic electricity and gas price controls. A spokesman claimed that the relaxation would be not be helpful to those in ‘fuel poverty’ and expressed concern over the pressure tactics of “unscrupulous salesmen” attempting to persuade consumers to switch on the doorstep.

Energy Watch is also questioning Ofgem’s assertion that the energy market is working well. “The assumption is being used to partly justify proposals for a relaxation of price controls on energy”, it said in a statement.”

Since May 1999, every domestic and industrial consumer in the UK has had the option to switch supplier and McCarthy said that the UK market is one of the most competitive in Europe.

100 000 electricity customers and 67 000 gas customers are switching supplier a week. This is a higher rate than for any other deregulated utility. More than 70 per cent of all gas customers and half of all electricity customers are already on tariffs which are not price controlled. Controls do not apply to customers paying by direct debit or those who have switched from their host supplier.

Ofgem will retain powers through competition laws to reintroduce controls and will be closely monitoring the markets. Charges paid by suppliers to monopoly owners of wires and pipes used to transmit electricity and gas to homes and industry will stay under regulatory price controls.

“The focus of Ofgem’s work going forward will increasingly be on monitoring competition and using competition law to tackle market abuse, pursuing a range of measures aimed at helping vulnerable customers and continuing work with other organisations to make it easier for customers to choose and change supplier”, said McCarthy.

Energy Watch said it would be putting out a more detailed response to the Ofgem proposals in due course.

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