Electricity market reform: potential synergies and conflicts of interest.

The Department of Energy & Climate Change (DECC) published a technical update on electricity market reform (EMR) in December 2011. It indicated that DECC intends to confer the EMR delivery function on the GB system operator (SO).

DECC and the Office for Gas and Electricity Markets (Ofgem) are conducting this joint project to assess the extent to which the SO performing the EMR delivery role creates new conflicts of interest and/or new synergies for National Grid. It is intended that this project looks at synergies and potential conflicts from when National Grid would formally take on the delivery role, currently anticipated to be in 2014.

As part of this work we have engaged with stakeholders, including generators, consumer groups, large industrial energy users and investors. We published an open letter on 8 March. The letter sought views on the synergies between the SO’s existing role and its proposed role as EMR delivery body. The letter also asked what, if any, conflicts respondents felt could arise and how best these could be mitigated.

As part of this dialogue DECC and Ofgem held a workshop on the 27th of March, attended by over 50 representatives from industry, consumer groups and third parties. In addition we received 27 responses to the open letter, from a range of stakeholders including: Consumer Focus, the Campaign to Protect Rural England, 5 of the largest energy suppliers, trade associations, independent generators, interconnector companies, private individuals, the Scottish Government and National Grid. The 27 responses included 2 responses marked as confidential. The non-confidential responses are published on the Ofgem website.