October 19, 2011 / 1:40 PM / 8 years ago

UK backs urgent retail energy market intervention

* Ofgem urged to dilute power of six dominant suppliers

* Government promises to enact supplementary measures

* Calls on utilities to reimburse overcharged households

LONDON, Oct 19 (Reuters) - The UK government said it would back “serious intervention” by the nation’s energy regulator to overcome what it described as “deep-seated” problems in the retail power market including unaffordable bills and insufficient competition.

Competition is being stifled by tariff complexity and a lack of transparency, the UK’s energy and climate change committee said in a statement on Wednesday, calling on regulator Ofgem to ensure that reforms already being driven through succeed in diluting the power of the dominant six energy firms.

“The government will work closely with Ofgem to ensure that taken together Electricity Market Reform (EMR) and the liquidity reforms reduce barriers to entry and deliver the necessary improvements in wholesale market liquidity,” the committee said in response to Ofgem’s promise in March to shake up the market.

It welcomed Ofgem’s efforts to lower barriers to entry by boosting liquidity in the UK’s wholesale electricity market, saying credible prices and access points for new entrants are essential for cutting power plant emissions.

The government promised, furthermore, to introduce reforms where structural barriers to market entry are not addressed by Ofgem.

It described the tariff complexity confronting consumers as a “blight” that should have been “taken in hand years ago”.

Ofgem earlier this week announced plans to overhaul how energy firms bill their customers after repeatedly telling the biggest utilities to offer simpler and fairer tariffs so consumers can more easily compare prices.

In its published response, the government asked suppliers to take the initiative and reimburse households that have been overcharged as a result of the controversial practice of doorstep selling.

In the past Ofgem has said it will force these companies to auction off up to a fifth of the electricity they generate to make room for new companies and boost competition.

Firms risk facing a referral to the Competition Commission if they fail to reform, the regulator has warned.

Britain’s big six utilities are Scottish and Southern Energy , Centrica , Iberdrola’s Scottish Power , RWE’s npower , EDF Energy and E.ON UK .

Following a summit on Monday chaired by Prime Minister David Cameron and attended by the big six suppliers, the government urged British households struggling to pay fuel bills to switch suppliers, check their tariffs or insulate their homes to save money.

Energy Secretary Chris Huhne said the meeting was encouraging and dismissed suggestions that, without an actual fuel price cut, the outcome would do little to help fuel consumers.

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