On 14 March 2011, the OFT announced that it was launching a market study into off-grid energy. The off-grid energy market comprises the energy sources available to the 3.6 million homes that are not served by the main gas grid in the UK. The formal announcement of a market study follows a short consultation on its scope initiated in January 2011 (see Community Week issue 506) which resulted in over 300 submissions to its initial consultation indicating concerns surrounding the industry, particularly with regards to heating oil and liquefied petroleum gas ('LPG'), which are the principal methods of off-grid energy supply, with claims of high prices, a lack of transparency, misleading information and barriers to switching.
The OFT will investigate these energy sources and whether competition is working well for consumers. The market study will also look at whether microgeneration, where individual households produce their own energy, could become an effective alternative to existing off-grid energy sources. Microgeneration includes domestic energy productions by such means as wind turbines and solar panels.
The catalyst for the investigation is primarily the severe cold weather experienced by the UK in December 2010 and complaints of the soaring price of heating oil in particular. Consumer Focus, the consumer rights advocate, welcomed the study and stated that people living in rural areas should not be penalised with higher energy costs. The ability to access alternative suppliers or switch to substitute energy sources may be uniquely restricted to off-grid consumers.
The market study will encompass a review of the market structure, competitive factors, effect on consumers and issues surrounding pricing.
A market investigation may result in recommendations to businesses or Government or may be the first stage towards enforcement action. The consultation remains open until 27 May 2011 and the OFT expects to publish its findings in October 2011
To view Community Week, Issue 513; 18th March 2011 in full, Click here.
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