35/11    14 March 2011

The OFT today formally launched a market study into off-grid energy, following a short consultation on its scope. The study will cover both consumer and competition issues and consider the main energy sources available to the 3.6 million households off the main gas grid in the UK.

The OFT received over 300 submissions on the scope of the study, including from off-grid customers, consumer associations and industry. The high number of submissions reflects widespread concerns about the supply of off-grid energy, particularly with regards to heating oil and liquefied petroleum gas (LPG), with claims of high prices, a lack of transparency, misleading information and barriers to switching.

The study will focus on those people who currently rely on either heating oil or LPG to heat their homes. As part of this, the OFT will  look at the market's structure and the choice of suppliers, whether competition is working well for consumers, and contractual terms and fairness in supply agreements. The study will also examine alternative fuel sources, looking for example at the extent to which micro-generation technologies, including those based on renewable energy sources such as solar panels and wind turbines, are or will become effective alternatives to heating oil and LPG.

Mary Starks, OFT Director of Infrastructure, said:

'Around three and a half million households are not connected to the gas grid and we want to investigate whether the markets in alternative sources of domestic energy are working competitively, efficiently and fairly for them and, if not, what improvements can be made.

'The severe cold weather in December brought a raft of complaints about heating oil in particular. Responses to our scoping consultation confirmed that concerns remain. We will now investigate these in more detail and report back before next winter.'

The OFT expects to publish its market study in October 2011. It will be contacting key parties directly during the course of the market study and is also inviting contributions from any interested parties by 27 May 2011. These can be submitted by email to offgrid@oft.gsi.gov.uk, or in writing to:

Off-Grid Energy Market Study Team,
Office of Fair Trading (2nd Floor),
Fleetbank House,
2-6 Salisbury Square,
London
EC4Y 8JX

Further information on the off-grid energy market study, including a statement of scope (pdf 276 kb), is available on the project page.

NOTES

1. In January 2011, the OFT announced its intention to launch a market study into the energy supply to off-grid customers. See press release
2. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows the OFT to obtain information and conduct research. Effectively, they allow a market-wide consideration of both competition and consumer issues. 
3. Market studies examine why particular markets are not working well for consumers. They take an overview of regulatory and other economic drivers in the market and consumer and business behaviour. Possible outcomes of market studies include: enforcement action by the OFT, a market investigation reference to the Competition Commission; recommendations for changes in laws and regulations, recommendations to regulators, self-regulatory bodies and others to consider changes to their rules, campaigns to promote consumer education and awareness or a clean bill of health. Guidance for companies and their advisers and other interested parties on the procedures that the OFT will usually follow when conducting market studies is available here: Market Studies: Guidance on OFT approach (pdf 586 kb)
4. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers can seek advice from Consumer Direct (tel: 08454 04 05 06, www.consumerdirect.gov.uk).