New rules announced for small energy companiesWhich? welcomes attempt to reduce red tape

13 June 2011

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Small energy companies have been relieved of some of their social and environmental obligations, in a bid to the reduce costs passed on to consumers and increase competition in the energy market. 

Energy minister Charles Hendry announced that companies with fewer than 250,000 customers would not have to take part in the Carbon Emissions Reduction Target (CERT) and Community Energy Saving Programme (CESP) schemes. Previously all companies with more than 50,000 customers had to take part in the schemes, which commit them to spending money on reducing their carbon emissions and encouraging their customers to save energy.

Richard Lloyd, executive director of Which? said 'we welcome efforts to reduce the regulatory burden on smaller suppliers but red tape isn't the biggest obstacle to competition'.

Smaller energy companies struggle

The schemes, which benefit the environment as well as UK consumers, require energy companies to invest money in energy efficiency. Companies pass this cost on to consumers via their energy bills.

Smaller energy companies reaching the 50,000 mark have struggled with the commitments. The companies have had to address their business model and found it increasingly difficult to sustain.

Charles Hendry says that he hopes the change will help smaller suppliers to grow and encourage more entrants into the energy market. The changes mean smaller energy companies such as First Utility, Good Energy and OVO will have a chance of competing with the 'Big Six'.

Competition in the energy market

Which? acknowledges that there are still further barriers to competition in the energy market which need to be addressed. Richard Lloyd, executive director of Which?, said:

'If the Government wants smaller suppliers to challenge the dominance of the Big Six companies then there must be a fundamental overhaul of the wholesale market so that new providers can buy the energy they need to supply large numbers of customers.'

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Join the debate

In a guest post for Which? Conversation, First Utility suggest new suppliers are key to shaking up the UK's energy market. Do you agree? Should smaller energy companies have even more red tape removed to allow them to offer more competitive packages to customers?