Ofgem wants to give independent energy suppliers a more level playing field to compete against their larger rivals and also increase competition between the six dominant companies: British Gas, EDF, E.ON, RWE npower, Scottish Power and SSE.
Under the proposals, the six majors will have to post the prices at which they buy and sell wholesale electricity on power trading platforms up to two years in advance.
They will be obliged to trade at these prices, which means independent suppliers and generators will have far more opportunities to buy and sell the power they need to compete effectively.
Ofgem believes that posting prices in this way will make wholesale prices clearer for all players in the market and the regulator has the power to fine firms that do not comply with the new rules.
Andrew Wright, senior partner for markets at Ofgem, said: “Our aim is to improve consumer confidence and choice by putting strong pressure on prices through increased competition in the energy market.
“Greater price transparency will assist investors seeking to build new generation plant and help secure supplies for consumers, who are also set to benefit from a simpler, clearer and fairer energy market thanks to our retail market reforms.”
The proposals were welcomed by UK Energy Secretary Ed Davey, who said that “an increased role and level playing field for independent suppliers and generators is precisely what will help drive the competition that delivers better value for consumers and businesses”.
“Independent suppliers will have greater access to the power generated by the Big Six and other large power producers, enabling them to purchase and deliver cheaper energy to consumers.
“Ofgem’s proposals to increase transparency in the way electricity is traded will give independent generators a foothold in the UK energy market and encourage new players to invest.”