They will be obliged to trade at the prices named, which the regulator says will boost liquidity. There will also be requirements on the big six and the two largest independent generators, Drax and GDF Suez, to make products available to support hedging and report information.
The regulator may fine companies if they breach this “market maker obligation” or related requirements under its proposed “Secure and Promote” licence condition.
Andrew Wright, senior partner for markets at Ofgem, said: “Our aim is to improve consumer confidence and choice by putting strong pressure on prices through increased competition in the energy market. Ofgem’s proposals will break the stranglehold of the big six in the retail market and create a more level playing field for independent suppliers, who will get a fair deal when they want to buy and sell power up to two years ahead.”
The industry has previously raised concerns that, depending on the design details, a market maker obligation could expose firms to financial regulation and prove very costly to implement.
Energy secretary Ed Davey urged the industry to work with Ofgem to implement the proposals “as swiftly as possible”. He said government is prepared to use the Energy Bill to improve liquidity should Ofgem’s proposals be “delayed or frustrated”.