RETAIL MARKET COMPETITION ENFORCEMENT (OFGEM POWERS)

1. Regulatory Purpose

Ofgem, acting through the Gas and Electricity Markets Authority (GEMA), supervises competition and consumer protection in Great Britain’s retail electricity and gas markets. Its enforcement function is designed to prevent supplier misconduct, anti-competitive agreements, abuse of market power and breaches of licence conditions while securing appropriate remedies for consumers.

Ofgem currently states that it may investigate suspected breaches, issue compliance orders, require consumer redress and impose financial penalties. For breaches of energy licence conditions, penalties may reach 10% of an undertaking’s turnover.

2. Licence-Based Enforcement Powers

The principal electricity enforcement framework appears in the Electricity Act 1989. Under section 25, where GEMA is satisfied that a regulated person is contravening, or is likely to contravene, a relevant licence condition or requirement, it may make a final order requiring compliance. Where urgent intervention is required, it may impose a provisional order.

This mechanism is particularly important in retail markets because supplier licence conditions regulate matters such as customer treatment, billing, sales conduct, switching processes and financial resilience.

The Act also provides mechanisms for financial penalties, information gathering and judicial challenge. Compliance with final and provisional orders can ultimately be enforced through civil proceedings.

3. Competition Act 1998 Powers

Ofgem also possesses concurrent competition-law jurisdiction with the Competition and Markets Authority. It may enforce the Chapter I prohibition, which prohibits anti-competitive agreements and concerted practices, and the Chapter II prohibition, which prohibits abuse of a dominant position in relevant energy-sector activities.

The concurrency system means Ofgem must consider whether competition-law proceedings are more appropriate than sector-specific licence enforcement before making certain orders or imposing penalties under the Electricity Act.

The Digital Markets, Competition and Consumers Act 2024 has also strengthened aspects of competition and consumer-law enforcement, including investigatory sanctions and a statutory emphasis on expedition in competition cases.

4. Investigations, Penalties and Consumer Redress

Ofgem can investigate suspected infringements, require documents and information, and use enforcement procedures separating investigators from enforcement decision-makers.

Possible remedies include financial penalties, directions to change conduct, consumer compensation and payments into redress arrangements. Ofgem explains that its enforcement policy seeks both deterrence and restoration of consumers who have suffered loss, inconvenience or other harm.

A practical example arose in Ofgem’s investigation of Economy Energy, E (Gas and Electricity) and Dyball Associates. Ofgem found an infringement of the Chapter I prohibition concerning domestic gas and electricity supply and imposed penalties of £650,000, £200,000 and £20,000 respectively.

Case Law

Case Name/Citation: R (British Gas Trading Ltd) v Gas and Electricity Markets Authority [2019] EWHC 3048 (Admin).

Facts: British Gas challenged aspects of Ofgem’s methodology implementing the statutory default-tariff price cap. It argued that a material assumption affecting suppliers had not been adequately disclosed during consultation.

Legal Issue: Whether Ofgem had acted lawfully and fairly when designing a major retail-market regulatory intervention.

Judgment: The High Court granted declaratory relief concerning the challenged assumption.

Legal Principle/Ratio: Even where Ofgem exercises specialist economic regulatory powers, materially relevant assumptions must be sufficiently disclosed where procedural fairness requires meaningful consultation.

Significance: Retail-market intervention is not immune from public-law scrutiny merely because it involves complex economic regulation.

Case Name/Citation: Economy Energy, E (Gas and Electricity) and Dyball Associates — Ofgem Competition Act infringement decision, 26 July 2019.

Facts: Ofgem investigated arrangements between competing retail-energy businesses and found collusive conduct relating to the supply of gas and electricity to domestic consumers.

Legal Issue: Whether the arrangements infringed the Chapter I prohibition under the Competition Act 1998.

Judgment: Ofgem found an intentional or negligent infringement and imposed financial penalties.

Legal Principle/Ratio: Retail suppliers must determine their competitive strategy independently; agreements or concerted practices restricting competition may attract substantial penalties.

Significance: The decision demonstrates that Ofgem’s competition powers extend beyond licence enforcement to direct application of UK competition law.

5. Market-Wide Competition Intervention

Ofgem’s powers are not limited to individual enforcement cases. In 2014, following a joint assessment with competition authorities, Ofgem referred the GB energy market for a full CMA market investigation because of concerns that retail competition might not be delivering effective outcomes for consumers and small businesses.

Conclusion

Ofgem’s retail-market competition powers operate through a layered system of licence enforcement, compliance orders, financial penalties, consumer redress, information gathering and concurrent Competition Act enforcement. The Electricity Act 1989 provides sector-specific tools, while the Competition Act 1998 addresses collusion and abuse of dominance. These substantial powers remain constrained by procedural fairness, proportionality, statutory purpose and judicial review, ensuring that competition enforcement protects consumers without placing Ofgem beyond ordinary principles of public law.