Ofgem confirms new rules for the big six to boost liquidity

The big six will have to post wholesale power prices two years in advance under new rules to boost liquidity, Ofgem confirmed on Wednesday.

This “market making obligation”, which comes in on 31 March, is part of a raft of measures intended to help independent energy companies access the products they need. However, it was resisted by some major suppliers, who said it was costly and unnecessary.

Andrew Wright, acting chief executive of Ofgem, said: “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.”

Energy secretary Edward Davey said: “This is a significant and welcome toughening up of competition in electricity markets. By making these wholesale prices more transparent, it will help reveal how the big six energy companies are trading, and make it easier for new competition to challenge their business model.”

In separate moves to improve transparency, large energy suppliers must publish their annual “segmental statements” two months earlier. These give a breakdown of costs, revenues and profits in each company’s generation and supply businesses.

They will have to start reporting “return on capital employed”, which is seen as a more meaningful measure of profitability than profit margins.

Ofgem also encouraged the big six to follow the example of Scottish Power and Centrica and provide extra detail on their trading activities. The regulator will consider bringing in new rules if companies do not act voluntarily.

Wright said: “No other European regulator has gone as far as Ofgem in making this information accessible for consumers. Now we are taking further steps to ensure that it is published more quickly, and that it gives a robust, useful and accessible picture of company profits.”