Ofgem is planning to remove the market making obligation (MMO) for incumbent suppliers introduced by the regulator in 2014 to improve the liquidity of the wholesale energy market and enhance access for smaller rivals.
The MMO requires obligated companies to regularly post offers on trading platforms to buy or sell power over a variety of timescales, whilst also limiting the spreads between the two.
It originally applied to all of the big six suppliers but Ofgem has since approved requests by three – Eon, Scottish Power and Centrica – to remove the special condition from their licenses after they sold off large chunks of their generation portfolios.
The regulator is now considering a similar request by RWE following the transfer of its remaining shares in Innogy, including its UK supply arm Npower, to Eon.
In the event that RWE is released from the obligation, Ofgem said it intends to suspend the requirement entirely to prevent the two companies still affected – SSE and EDF – from being subject to “disproportionate and potentially unfair costs”.
“On balance, we do not think it is feasible for the MMO to continue with only two parties,” it added in an open letter to stakeholders.
The regulator also noted that the sale of SSE’s retail division to Ovo could eventually reduce the number of obligated parties to just one.
Ofgem had already considered suspending obligation once already but decided last November to hold off for the time being.