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LONDON (Alliance News) - UK gas and electricity regulator Ofgem Wednesday said it is launching an investigation into whether SSE PLC put its competitors at a disadvantage in the electricity connections market, as it announced reforms to try to increase competition within the sector.
The focus of Ofgem's report on the electricity connection sector was on new housing developments and those not yet connected to the grid, who can choose from whom they get their electricity connection, whether it be from large companies or independent providers.
"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," said Maxine Frerk, Ofgem's senior partner.
Ofgem has been reviewing the electricity connections market, worth GBP500 million per year, for six months to identify how competitive it is and to spot any barriers to entry for new competition.
"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," said the regulator. "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."
As part of the reforms, independent companies will be less reliant on distribution companies and will be able to "determine points of connection", Ofgem said in its statement.
"The code [of practice] levels the playing field for competitors by reducing their reliance on the local electricity network companies," said Ofgem.
The regulator also identified that there are differences in how the connection services are provided across Great Britain, which is causing a barrier for new competition to enter the market. Ofgem plans to make standard processes across the country to reduce hassle for customers and increase competition.
"During the review, Ofgem also found evidence of a possible breach of competition law...Ofgem has used its competition powers to open an investigation into whether SSE put its competitors at a disadvantage in the electricity connections market," said the regulator.
Ofgem said it will investigate whether SSE "abused a dominant position" but highlighted the fact that it has launched an investigation does not imply that SSE has breached competition law.
"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," said Frerk.
In addition, Ofgem said it has set a "gold standard" for energy price comparison sites through its revised "confidence code". The code requires accredited sites to meet tighter standards on how tariffs are displayed, said Ofgem.
"This is so customers can be confident that deals aren't hidden from view. Sites will also have to list prominently which energy companies they have commission arrangements with, and make it clear that they earn commission on certain tariffs," said the regulator.
Ofgem said around 40% of energy shoppers use comparison sites, such as those of Moneysupermaket.com Group PLC, to search for electricity and gas deals and said the code will give consumers reassurance.
The code, which will come into affect in March, has been revised from the Consumer Focus code in 2013 after Ofgem found the old code allowed sites to take users straight to a partial view of tariffs from suppliers paying commission to the site.
"Today's changes will help consumers make an informed choice when using an accredited comparison site," said the regulator.
As part of the changes to the code, sites must show all available tariffs and use clearer language that has been approved by Ofgem, alongside making commission arrangements transparent.
"Comparison sites are a great place to start energy shopping, but customers need to feel confident that the sites are providing information they can trust. From the end of March, Confidence Code accredited sites will need to be more transparent with their users and I'd encourage them to meet these new standards earlier," said Ofgem.
SSE shares were down 0.4% to 1,499.00 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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