The Government has announced a shake-up of energy regulation in an attempt to end anti-competitive practices in the electricity market that inflate wholesale prices "by hundreds of millions".
Ed Miliband, Secretary of State for energy and climate change, gave Ofgem greater powers to fight market abuse and issue financial penalties.
As part of the reforms, Ofgem will also be responsible for ensuring the UK has enough energy and reducing emissions.
However, the Government took the power to grant companies access to the national power grid from the regulator. Mr Miliband will take on this role in a move understood to stem from concerns that big electricity producers were trying to stop plans allowing rival generators from renewable sources selling their supplies.
National Grid, the company in charge of the network, had tabled plans giving new companies quicker access to the grid, which currently takes up to a decade.
But Ofgem last month accused a group of electricity suppliers, including Scottish and Southern Energy, the Association of Electricity Producers (AEP), Eon and EDF of "filibustering" by vetoing the proposed changes. The industry dismissed the accusations.
Ofgem welcomed the "stronger powers to tackle abuse in the wholesale electricity market, which could add hundreds of millions of pounds a year to electricity costs, and for more robust financial penalties".
Ian Parrett, an energy analyst at Inenco, said the tougher regulation was "extremely positive" in an electricity market still dominated by regional blocs.
The reforms are part of a White Paper looking at the UK's transition to a low carbon economy, which Mr Miliband claims will create thousands of jobs by 2020.
The paper set out plans to use renewable energy to generate 15pc of UK's energy needs by 2020, though admitted this was likely to create huge price volatility on the wholesale market.
It also insisted that a focus on renewables means the UK will not have to increase expensive gas imports over the next decade, despite falling North Sea production.
However, Mr Miliband's focus on alternative energy was immediately dealt a blow when Vestas, the UK's only wind turbine manufacturer, said it still plans to close its Isle of Wight plant today with the loss of 600 jobs.
Many in the energy industry questioned whether the subsidies were enough to make private investment in renewables economically viable.
"Question marks remain over the ability of these plans to attract the £150bn of private sector investment needed to renew our energy infrastructure, improve energy security, and allow us to meet climate change targets," said Dr Neil Bentley, CBI director of business environment.
A senior source at one of the big six utility companies said the company had doubts that it would be able to justify spending on renewables. "Wind power costs five times as much to produce as nuclear. It's a very tough decision whether to go ahead with our own plans for a big renewables plant at the moment."
Centrica and RWE Npower welcomed the paper's focus on renewables, but EDF said its team was still examining the new proposals.
As part of the reforms, Ofgem will also be responsible for ensuring the UK has enough energy and reducing emissions.
However, the Government took the power to grant companies access to the national power grid from the regulator. Mr Miliband will take on this role in a move understood to stem from concerns that big electricity producers were trying to stop plans allowing rival generators from renewable sources selling their supplies.
National Grid, the company in charge of the network, had tabled plans giving new companies quicker access to the grid, which currently takes up to a decade.
But Ofgem last month accused a group of electricity suppliers, including Scottish and Southern Energy, the Association of Electricity Producers (AEP), Eon and EDF of "filibustering" by vetoing the proposed changes. The industry dismissed the accusations.
Ofgem welcomed the "stronger powers to tackle abuse in the wholesale electricity market, which could add hundreds of millions of pounds a year to electricity costs, and for more robust financial penalties".
Ian Parrett, an energy analyst at Inenco, said the tougher regulation was "extremely positive" in an electricity market still dominated by regional blocs.
The reforms are part of a White Paper looking at the UK's transition to a low carbon economy, which Mr Miliband claims will create thousands of jobs by 2020.
The paper set out plans to use renewable energy to generate 15pc of UK's energy needs by 2020, though admitted this was likely to create huge price volatility on the wholesale market.
It also insisted that a focus on renewables means the UK will not have to increase expensive gas imports over the next decade, despite falling North Sea production.
However, Mr Miliband's focus on alternative energy was immediately dealt a blow when Vestas, the UK's only wind turbine manufacturer, said it still plans to close its Isle of Wight plant today with the loss of 600 jobs.
Many in the energy industry questioned whether the subsidies were enough to make private investment in renewables economically viable.
"Question marks remain over the ability of these plans to attract the £150bn of private sector investment needed to renew our energy infrastructure, improve energy security, and allow us to meet climate change targets," said Dr Neil Bentley, CBI director of business environment.
A senior source at one of the big six utility companies said the company had doubts that it would be able to justify spending on renewables. "Wind power costs five times as much to produce as nuclear. It's a very tough decision whether to go ahead with our own plans for a big renewables plant at the moment."
Centrica and RWE Npower welcomed the paper's focus on renewables, but EDF said its team was still examining the new proposals.
Source: The Daily Telegraph
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