MSE News: Scottish and Southern Energy throws open electricity market 12 October 2011 at 11:42AM in Energy 20 replies 2.8K views

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"SSE is to auction all of its power on the open market in a bid to bring new new suppliers into the energy market ..."

Read the full story:

Scottish and Southern Energy throws open electricity market

Rupert_Bear

As long as we were all prepared to keep quiet and pay the increases then the utility companys would do nothing about it. They know how difficult things are for the consumers but put profit before anything else. What crap was Cameron spouting about saying we are all in this together. Yea right!!!!

gadgetmind

SSE shares are down over 1% on this against a backdrop of a rising FTSE.

edgex

"The big six companies currently sell most of the electricity they generate directly to consumers, with only a small amount traded on the wholesale market."

is this correct?
wasnt this whole integrated system broken up at privatisation, so that generators were seperate from supply businesses, were seperate from the transmission business.

presumably these new rules are because ofgem have allowed generators & suppliers to be the same business again.

Consumerist

edgex wrote: »

"The big six companies currently sell most of the electricity they generate directly to consumers, with only a small amount traded on the wholesale market."
. . . is this correct?
wasnt this whole integrated system broken up at privatisation, so that generators were seperate from supply businesses, were seperate from the transmission business.

I think the the generation, transmission and retail businesses are still theoretically separate but there seems to be no restriction on who the generators can sell to - so they primarily sell to their own retail business (supplier) at undisclosed prices.

By auctioning 100% of generation, the trading price for all buyers (the suppliers) will be at an open-market price for all to see.

As I understand it, prices won't necessarily come down but the market will certainly be more competitive if all generators follow suit and there will be a level playing field for suppliers.

I'm no expert on the energy market but that's my take on the plan. Let's hope the other generators do follow suit.

dogshome

Hmmm - A question of wait and see I think, but my first thoughts are that huge % of the population are struggling to understand all the little rules of today's market or have given up trying, so a completely new tier of tariffs and rules isn't going to help.

As has already been commented, some of the present retailers have bought into both Power Generation and Distribution.
Whilst each one bought will have a seperate legal identity, the business phrase for this is 'Vertical Integration', and I know from my experience with the paper industry that it spells bad news on prices as profit margins can be moved up and down the chain at will

Consumerist

dogshome wrote: »

Hmmm - A question of wait and see I think, but my first thoughts are that huge % of the population are struggling to understand all the little rules of today's market or have given up trying, so a completely new tier of tariffs and rules isn't going to help.

Tariff complexity is a different issue which Ofgem have consulted about as part of their Retail Market Review.

As has already been commented, some of the present retailers have bought into both Power Generation and Distribution.
Whilst each one bought will have a seperate legal identity, the business phrase for this is 'Vertical Integration', . . .

My understanding of the effect of 100% auctioning of generation is that it will dismantle this vertical integration. Since suppliers usually buy wholesale energy on longer-term contracts, I'm not sure how the "day ahead" contracts will work for them if they can't hedge, or "gamble", by buying and selling them between themselves.

magyar

This is a clever move by SSE because they know it will have minimal effect (because the article is wrong: technically ALL power is sold on the wholesale market).

It will slightly increase prices, because SSE will no longer be able to control their imbalance positions as accurately.

But hey, you guys asked for it!

magyar

Consumerist wrote: »

Since suppliers usually buy wholesale energy on longer-term contracts, I'm not sure how the "day ahead" contracts will work for them if they can't hedge, or "gamble", by buying and selling them between themselves.

It won't make any difference. They can still do financial hedges on top.

patman99

Will the bidding be open to individual home-owners ?. If not, then there may be some leeway in setting-up a co-operative to buy/sell the units of electricity at a profit of not more than 1% to cover admin costs.

magyar

patman99 wrote: »

Will the bidding be open to individual home-owners ?. If not, then there may be some leeway in setting-up a co-operative to buy/sell the units of electricity at a profit of not more than 1% to cover admin costs.

No, only licenced suppliers.