Correction of Non-Competitive Bidding Behaviour

Detailed Explanation With Case Laws

1. Introduction

Non-competitive bidding behaviour occurs when an electricity market participant submits bids or offers in a way that weakens genuine competition or allows it to obtain an unfair market advantage. This is particularly important in electricity markets because electricity cannot easily be stored and supply must continuously match demand.

A generator with significant market power may, for example, submit unreasonably high bids, withhold available generation capacity, submit misleading information, or coordinate bidding with competitors. Such conduct can increase wholesale electricity prices and ultimately harm consumers.

Correction mechanisms are therefore used by regulators to detect, investigate, stop and remedy anti-competitive bidding.

2. Forms of Non-Competitive Bidding

Non-competitive behaviour may include:

excessive bidding without a corresponding increase in costs;

withholding available generation capacity;

submitting false or misleading generation information;

coordinated bidding between competitors;

manipulating the Balancing Mechanism;

using market power during periods of scarcity; and

strategic bidding designed to influence market prices.

Ofgem has historically identified excessive bids and capacity withdrawal as potential methods of exploiting temporary market power. (Ofgem)

3. Market Monitoring

The first correction mechanism is continuous market monitoring. Regulators examine bidding patterns, generation availability, market prices and trading behaviour.

In Great Britain, Ofgem monitors wholesale energy transactions and the behaviour of companies and traders. It can investigate suspected market manipulation and other breaches. (Ofgem)

This monitoring can identify unusual bidding patterns, such as a sudden increase in bids that cannot be explained by fuel costs or other market conditions.

4. Investigation and Information Gathering

When suspicious bidding is detected, the regulator can investigate the conduct and require relevant information.

The investigation may compare:

the generator's actual operating costs;

its submitted bids;

available generation capacity;

market conditions;

communications between traders; and

the effect of the bidding on market prices.

This evidence helps distinguish legitimate commercial bidding from conduct designed to manipulate the market.

5. Regulatory Directions and Licence Conditions

A regulator may require a company to change its bidding practices or comply with specific licence conditions.

In 2023, Ofgem proposed reforms aimed at preventing generators from obtaining excessive profits through the Balancing Mechanism after identifying concerns about the way some generators were using existing rules. (Ofgem)

Such intervention is important because correction does not always require punishment. A regulatory direction can also prevent continuing harmful behaviour.

6. Competition Law

The Competition Act 1998 provides another important correction mechanism. Chapter I prohibits anti-competitive agreements and concerted practices, while Chapter II prohibits abuse of a dominant position.

Ofgem has concurrent competition-law powers with the CMA in relevant electricity activities. (Ofgem)

Therefore, coordinated bidding between competitors may potentially constitute an anti-competitive agreement, while exploitative bidding by a dominant generator may raise issues of abuse of dominance.

7. REMIT and Market Manipulation

Wholesale electricity bidding can also be regulated through REMIT, which prohibits market manipulation and attempted market manipulation.

A significant example is the Ofgem InterGen enforcement case (2020). Ofgem found that InterGen companies had breached Article 5 of REMIT by submitting false or misleading information concerning their generation during a period known as the “Darkness Peak”. The information was used in connection with Balancing Mechanism bids to obtain payments for generation. (Ofgem)

This demonstrates how misleading bidding information can be corrected through regulatory enforcement.

8. Relevant Case Law

SSE Generation Ltd v CMA [2022] EWCA Civ 1472

This case concerned electricity transmission charging methodology rather than bidding directly. The Court of Appeal examined the legality of a regulatory decision affecting electricity generators and transmission charges. It demonstrates the importance of lawful regulatory decision-making and proper statutory authority when correcting market arrangements. (BAILII)

Nexans France SAS v London Array Ltd [2026] EWCA Civ 887

This case concerned alleged cartel conduct and bidding in connection with the London Array electricity project. The Court of Appeal considered evidence concerning exchanges of price information and bidding within a cartel context. It illustrates the legal risks associated with coordination and information exchange between competing bidders. (BAILII)

9. Penalties and Remedies

Where non-competitive behaviour is established, authorities may impose:

financial penalties;

compliance directions;

licence enforcement;

consumer redress;

requirements to change trading practices; and

in appropriate wholesale-market cases, sanctions for market manipulation.

Ofgem states that competition-law infringements can result in penalties of up to 10% of turnover, while REMIT enforcement can involve significant sanctions. (Ofgem)

10. Conclusion

Correction of non-competitive bidding behaviour is essential for maintaining fair electricity prices, effective competition and consumer confidence. The main mechanisms include market monitoring, investigation, data analysis, regulatory directions, competition law, REMIT enforcement and financial penalties.

The InterGen enforcement case particularly demonstrates that submitting misleading information to influence electricity-market outcomes can amount to market manipulation. Therefore, modern energy regulation seeks not only to punish harmful bidding after it occurs but also to create preventive systems that detect and correct anti-competitive behaviour at an early stage.