Ofgem, the Office of Fair Trading (OFT) and the Competition and Markets Authority (CMA) have today announced a framework for how they will assess competition in the energy market, looking at both the domestic and small business markets.
Ofgem and the OFT will use the framework to produce the first annual review of the market in March 2014. It will draw on Ofgem’s knowledge and expertise in energy markets and competition within them, as well as the OFT’s wide-ranging experience of assessing competition in a range of different markets. The CMA will become the UK’s lead competition and consumer body from April 2014.
The framework will be used to look at the market share the 6 largest suppliers have, how vigorously they are competing and how easy it is for new entrants to enter the market and compete against larger suppliers. It will also look at how the vertical integration of suppliers affects competition, and how well suppliers engage with consumers. The review will also consider evidence on the level of profits at different parts of the supply chain.
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Media enquiries to be directed to Russell Guthrie on 020 7211 8899.
The assessment will build on work already carried out by Ofgem to reform the energy market. Implementation began at the end of August 2013 with the package to be in place by end of March 2014. Ofgem’s proposed reforms to open up the wholesale power market so that independent suppliers can compete more easily against the 6 largest suppliers are anticipated to be in place by Spring 2014.
On completing this assessment, Ofgem, OFT and CMA, as appropriate, will each need to consider next steps which may include further assessment of particular issues, proposing no further action, specific reforms or proposing a market investigation reference.
Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority’s powers and duties are largely provided for in statute, principally the Gas Act 1986, the Electricity Act 1989, and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.
The OFT’s mission is to make markets work well for consumers. It achieves this by promoting and protecting consumer interests throughout the UK, while ensuring that businesses are fair and competitive.
In April 2014, the CMA will become the UK’s lead competition and consumer body. The CMA will bring together the existing competition and certain consumer protection functions of the Office of Fair Trading and the responsibilities of the Competition Commission, as amended by the Enterprise and Regulatory Reform Act 2013. The CMA, which is a non-ministerial government department, was established on 1 October 2013 and will be taking on responsibility for cases, market studies and other work from 1 April. See the CMA’s homepage for more information.