Watchdog casts doubt on need for UK power pool
In working papers published as part of the CMA's investigation into the electricity market, it says that there is little evidence to suggest a centralised dispatch system, or mandatory pool, would be more efficient or more transparent than the existing system of self-dispatch and bilateral trading.
One of the key objectives of a mandatory market is creating a firm and trustworthy reference price, the CMA said. But the existing system means that prices are "for most purposes" already robust and transparent, it said.
Around 40pc of all power consumed is traded through the N2Ex and APX day-ahead auctions, and prices of individual trades in the forward market are available through Trayport, a software provider.
The CMA asked UK transmission system operator to study whether centralised dispatch would be more efficient and generate savings from better balancing the system. National Grid found that there would be no substantial savings in doing so.
It also found that plant owners are more reluctant to switch off their plants than National Grid had been, when it was the central dispatcher of the system.
"National Grid hypothesised that plant owners may be able to factor in the additional maintenance costs implied by frequent starts and stops more accurately than could the [system operator] under centralised dispatch rules, and that self-dispatch may in this sense be more technically efficient," the CMA said.
"We do not believe that there would be a large advantage to competition from the point of view of increasing price transparency by reverting to centralised dispatch," the CMA said.
It also said entry costs under the existing system were fairly low and self-dispatch did not appear to be a barrier to new firms.
The opposition Labour party has said it would introduce a new system for power trading if it wins the general election in May. It has cited the need to create a robust reference price, particularly to settle contract for differences for renewable generators against. It has also argued that the pool would increase liquidity and allow the entry of new players to the market.
The previous Labour government abolished the England and Wales pool in 2001.