Power group’s decision could open market for small players

SSE will start auctioning its electricity supply in the day-ahead market by the end of the week, it confirmed yesterday.

The move could encourage more independent suppliers to enter the market. SSE will be the first of Britain’s six dominant energy suppliers to enact the measure, which is aimed at boosting liquidity in a market that has come under increasing Government scrutiny in recent years.

The utility aims to start trading a proportion of its total electricity supply and demand by tomorrow, and expects this proportion to reach 25 per cent during November. The volume of electricity traded will be increased gradually over the next few months, SSE said yesterday.

The company added that it expects all its electricity supply and demand to be traded in the day ahead market by the end of its current financial year.

The announcement was made after Energy regulator Ofgem said in March that it would force Britain’s ‘big six’ utilities to auction off up to a fifth of the electricity they generate, to make room for new companies and boost competition.

Firms risk a referral to the Competition Commission if they fail to embrace reform.

SSE, which has around 5.2 million electricity customers and 3.6 million gas customers, was among the suppliers that raised gas and electricity prices earlier this year, which led to criticism from UK consumer groups.

“Customers have demanded greater transparency around how we operate in the wholesale market,” SSE said yesterday.

“As well as improving liquidity, this approach will also improve the transparency of SSE’s activity in the wholesale market.”

UK energy watchdog Ofgem has warned that utilities must boost their traded volumes as liquidity in the UK’s power market falls behind its rivals. Britain’s day-ahead electricity market sees about 40 Gigawatt hours/day traded on exchanges with a further 200 GWh transacted privately via brokerages.

In contrast, European spot power exchange Nordpool sees 750 GWh of daily trades, while Germany sees about 500 GWh. SSE said its move to auction all its supply will transform the UK power market by adding 165 GWh of its own daily average trades to the pot. The utility, which makes up nearly 15 per cent of UK electricity demand, will continue trading in the forward power market, including entering long-term contracts with independent suppliers, it said.

Alistair Phillips-Davies, SSE’s generation and supply director, said: “This commitment from SSE will...help to address one of the perceived barriers to entry into the electricity supply market.

“If other energy companies adopt a similar approach, this commitment could lead to a transformation in the wholesale electricity market in Great Britain.”

Adam Scorer, director of external affairs at Consumer Focus said: “There have been many questions about how competitive the energy market is and the barriers to new energy suppliers. It is good to see one of the big players taking steps that will help smaller suppliers compete.

“The opening up of the day-ahead market is unlikely to make much difference to prices across the big suppliers in the short term, as they purchase most of their energy well in advance.

“But it should make it easier for new players to enter the energy supply business and help existing small suppliers to grow.”

Station’s carbon capture trial

SSE is seeking to develop a multi-fuel plant at Ferrybridge power station in West Yorkshire.

The company is also building a carbon capture trial plant at the power station.

Ferrybridge is the third coal-fired power station to be built on the site since 1924.

The Government has given its full backing for the Ferrybridge trial, putting forward £6.3m of public funds towards its cost.