Regulation of electricity utilities – sales of power

Approval to sell power

What authorisations are required for the sale of power to customers and which authorities grant such approvals?

Ofgem is the relevant authority to grant, supply licences to electricity suppliers before they may sell power to consumers. As a condition of the supply licence, the electricity suppliers must also act in accordance with certain other regulations, such as the Balancing and Settlement Code and the Smart Energy Code.

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

Electricity suppliers set the electricity prices, but the Secretary of State does have the power to impose tariff-related conditions on the electricity suppliers through the supply licences.

Following a referral of the energy market to the Competition and Markets Authority (the CMA) by GEMA, a detailed review of the retail energy market was undertaken. Among other things, the review found that limitations on suppliers’ tariffs were preventing competition and recommended that such conditions be removed. The CMA also suggested that electricity suppliers should be made to share details of domestic customers who have been on a default tariff for over three years to create an Ofgem-controlled database so that other suppliers would be able to contact such customers to offer cheaper rates tailored to their individual energy usage. The key area of concern was clearly the apparent overpayment for electricity by the customers on the poorest-value tariffs. On 19 July 2018, the Domestic Gas and Electricity (Tariff Cap) Act 2018 received royal assent, and as further discussed below, this new act puts in place a requirement on the energy regulator, Ofgem, to cap standard variable and default energy tariffs.

Rates for wholesale of power

Who determines the rates for sales of wholesale power and what standard does that entity apply?

Rates for sales of wholesale power are not determined by an entity but rather by the mechanics of supply and demand within the market.

Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?

The Energy Company Obligation (ECO) is a government energy efficiency scheme in Great Britain to help reduce carbon emissions and tackle fuel poverty. In brief, under ECO, larger energy suppliers fund the installation of energy efficiency measures in British households. Each obligated supplier has an overall target based on its share of the domestic energy market in Britain. The obligated energy suppliers work with installers to introduce certain efficiency measures into your home, such as loft or wall insulation, or heating measures.

The scheme began in April 2013, and over time it has been amended. The latest changes to the scheme occurred in 2017 and apply to measures installed from 1 April 2017.