Labour has pushed for the revival of pooling for the buying and selling of wholesale electricity generation.
During the concluding debate of the House of Commons committee stage for the price cap bill, held last Thursday (15 March), opposition spokesman on energy Alan Whitehead proposed the pool as part of a wider package of reforms to drive down bills in the long term.
Under the proposal, made by the opposition as an amendment to the bill, generators would sell into the pool at an agreed price. Buyers would then bid into the market based on the pool having been established at that agreed price.
Whitehead said a pool arrangement would promote greater transparency in the market, particularly when suppliers buy electricity from their own companies’ generation arms.
He said that pooling, which operates across Scandinavia, would create a level playing field between the independent energy outfits and the big six ex-nationalised companies.
Whitehead said: “It is not always obvious with bilateral deals in which companies are effectively trading with themselves—when one company has both generation and retail capacities—that they affect what is happening with the real price of energy at the point at which the trade is made.
“The system would allow independent generators to trade on the same basis as those vertically integrated generators, and, equally importantly, independent retailers bidding into the market would be able to bid in transparently, on the basis that they would know what the price was at that particular point.”
But James Heappey, a former member of the energy and climate change select committee, questioned whether a pooling arrangement would be required in the long term due to the increasing separation of retail and generation businesses by the larger energy companies.
A pool that operated between 1990 and 2001 was abandoned under the last Labour government after wholesale costs failed to fall in line with those of generation, according to an Ofgem fact sheet on the wholesale electricity market.