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OFT to Examine Off Grid Energy Market

The Office of Fair Trading (OFT) has announced a market study into the supply of energy to off grid consumers following a request by Energy Minister Charles Hendry. The study will look at whether the market is working for consumers who use energy sources, such as lpg, oil and renewable energy.

In a written statement to the House of Commons, Charles Hendry wrote: “The recent severe weather has caused significant concern about the domestic oil market and the liquefied petroleum gas market. I fully recognise the difficulties people have experienced with rising prices and supply problems.

“Underlying many of the complaints are concerns about the challenges of supplying oil and gas to rural communities and whether the current market structure provides the reassurance that consumers can get fuels for heating when needed at a price they can afford.

“The Office of Fair Trading is currently consulting on its annual plan to help determine its work programme for 2011/12. This includes proposals to prioritise markets impacted by high, rising and volatile commodity prices. The off gas grid energy market is clearly one such affected market.

“In response to the Office of Fair Trading consultation and mindful of the various issues highlighted by the recent severe weather, I have written to the Office of Fair Trading asking it to bring forward its competition and consumer study into off-grid energy. In addition, I have asked the Office of Fair Trading if the study could explore the longer term consumer issues, such as lifetime payback, consumer standards and labelling for alternative energy sources or supplies.”

Following discussions with the Department of Energy and Climate Change (DECC), the OFT has brought forward the study to consider recommendations before next winter. The study is likely to consider issues, such as the choice for consumers, clear and fair terms and conditions of supply, and competitive pricing, and proposes surveying energy users for their views.

Heather Clayton, OFT senior director of infrastructure, said: “Two and a half million people rely on off grid energy and it is vital that the markets that supply them function as well as they possibly can. We will be taking both competition and consumer issues into account through this comprehensive look at the market.”

Charles Hendry said: “There were major disruptions to deliveries because of the snow before Christmas, and the industry worked very hard to catch up on the backlog. As Minister, I agreed to relax the rules on drivers’ hours to enable more deliveries to be made, but people were concerned by the very steep increase in prices, from around 40p/litre to 70p/litre in just a few weeks.”

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