One of the largest new entrants to the UK energy supply market, First Utility, has described the move by Scottish and Southern Energy (SSE) to auction 100 per cent of its electricity to any household supplier as "smoke and mirrors".
, the largest independent domestic electricity
supplier, said today that SSE
’s move would not have "any positive impact" for new entrants in the energy
SSE announced yesterday that it would start trading a proportion of its total electricity supply and demand on the UK’s 'day-ahead’ wholesale market from this Friday (October 14), with a view to auctioning 100 per cent of its energy by the beginning of next year. SSE, the second largest electricity generator in the UK, said the move would provide transparency and would "help address one of the perceived barriers to entry into the electricity supply market".
The Government is trying to encourage more players in the energy market, which is currently dominated by the 'Big Six’, as it tries to drive down electricity and gas bills and get Britain on a low carbon footing.
However, First Utility, which promotes energy efficiency
through its smart meters and offers simpler tariffs and billing to its customers, said the move by SSE would have a "negligible impact" on its own wholesale energy requirements.
"The announcement today by Scottish and Southern Energy that it will begin auctioning its generated energy to any supplier will have a negligible impact on encouraging competition because the energy is only available on a day-ahead basis, which constitutes less than one per cent of First Utility’s wholesale energy requirement. The majority of the power it buys for customers is purchased up to two years in advance," First Utility said in a release.
First Utility, which launched its 'Manifesto for Modernising the UK’s Energy Industry’ today, is calling for far greater liquidity in the wholesale market for growing supply businesses such as First Utility. It said the energy regulator, Ofgem, should force all six energy utility companies to auction more than 50 per cent of their electricity on the wholesale market. Currently, Ofgem is proposing the 'Big Six’ auction 10 to 20 per cent by 2013.
Co-operative Energy, a recent entrant to the energy supply market, which is promising a fairer deal to customers and green energy as part of its mix, said today it welcomed SSE’s move, but said it did not go far enough.
"This is a step in the right direction for the energy industry as it provides more volume in wholesale markets," said Nigel Mason, business development manager for Co-operative Energy. "However, more volume is only part of the solution for small suppliers such as Co-operative Energy and others looking to gain entry into the market.
"In order for this to be an effective move, contracts need to be of the right duration, not just one day ahead and of the right shape, to match the profile of domestic consumption. To avoid indirect discrimination against the small suppliers it is essential that the rules of the auction process are properly addressed."
Despite new entrants coming into the UK energy market, many of which offer lower bills, simpler tariffs and greener solutions to householders, 99 per cent of people still get their energy from the Big Six.
SEE’s move is likely to go down well with politicians from both sides of the House of Commons, which have been turning up the pressure on big energy firms in recent months to break their dominance in the face of big hikes in electricity and gas bills. Energy Secretary Chris Huhne, meanwhile, is looking to open up the market as he pushes through reform of the electricity market to deliver low carbon energy at the lowest cost to consumers.
According to the Financial Times "one or two" other big utility firms are expected to announce similar moves to SSE’s by the end of the year.
Like this story? Please subscribe to our free weekly e-newsletter at the top of the page for more content like this.