More competition in electricity connections market is needed, says Ofgem
Press release
- Publication date
- Industry sector
- Distribution Network
- Competition developing too slowly in market for new electricity grid connections
- Ofgem’s reforms look to increase competition and reduce hassle for customers connecting to the electricity grid
- Ofgem launches an investigation to see whether SSE put its competitors at a disadvantage in the electricity connections market
Ofgem has today published the findings of its review of the electricity connections market. It has set out steps that the local distribution network companies must take within the next six months to help improve competitiveness. Ofgem has also opened an investigation that will examine whether SSE put its competitors at a disadvantage in the electricity connections market.
Customers who are not yet connected to the electricity grid, such as new housing developments, can choose who they get their electricity connection from. They don’t have to select the local distribution company, but can instead choose an alternative, independent, connection provider.
Over the last six months Ofgem has reviewed the electricity connections market to identify how competitive it is, identify any barriers to competition and make necessary improvements to the market. While we have seen more progress over the last five years to increase competition, the network company remains the sole provider for a number of key parts of the connections process. The differences in how these services are provided across GB is another barrier identified.
Ofgem’s reforms tackle this by requiring network companies to commit to an enforceable Code of Practice that will ensure a high standard performance in all aspects of the connections market. For example, rather than being reliant on the distribution companies, independent companies would be able to determine points of connection. The code levels the playing field for competitors by reducing their reliance on the local electricity network companies. Processes would also be made the same across the country, reducing hassle for consumers.
During the review, Ofgem also found evidence of a possible breach of competition law. Based on this information, and having notified the Competition and Markets Authority, Ofgem has used its competition powers to open an investigation into whether SSE put its competitors at a disadvantage in the electricity connections market. The fact that Ofgem has launched an investigation does not imply that SSE has breached competition law.
Maxine Frerk, Ofgem’s senior partner, distribution, said: “We are requiring electricity network companies to work quickly to resolve the issues identified in the connections market, to reduce the hassle of getting connected to the grid and help lower costs for customers.
We are determined to ensure this part of the energy market works in customers’ interest and will use the full range of our powers to do so.”
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Notes to editors:
1. View the findings of our review of the electricity connections market
The investigation is under the Chapter II prohibition of Competition Act 1998/Article 102 of the Treaty on the Functioning of the EU. The fact that Ofgem has launched an investigation does not imply that SSE has breached competition law. The purpose of the investigation is to examine whether there has been an infringement of competition law. Further information on the investigation process and the possible outcomes can be found in Ofgem’s enforcement guidelines.
3. Background and next steps:
Over the last six months we have reviewed the market for new connections to the electricity distribution network. We made the decision to open our review in response to concerns about whether competition in this market is effective.
We have engaged with a large number of stakeholders during the review - we received 80 responses to our call for information, spoke to over 100 customers through our customer research and met with a broad range of connections providers. Prior to the review, we had detailed engagement with stakeholders about parts of the market.
Electricity distribution network companies are expected to confirm their commitment to the code by 18 February 2015. Full responses to our consultation are requested by 18 March 2015. The DNOs will then be responsible for developing the Code of Practice. The finished Code of Practice must be submitted to us by no later than 1 June 2015.
For further press information contact:
Lisa O’Brien: 020 7901 7426
Dafydd Wyn: 020 3263 9943
Out of hours media contact number: 07766 511470