Generation and supply are now considered to be fully competitive markets and there is no regulation of prices. However, distribution and transmission are monopoly networks subject to price regulation by Ofgem. Licence conditions are still being developed for interconnector operations.
The Utilities Act 2000 prohibits the same person from owning both a distribution and a supply business – this is to make sure third party access to the networks iss fair, and there is open competition for energy supply.
For gas specifically, a business must have a licence to participate in shipping, transportation and supply. Shipping and supply are competitive activities. Transportation is a natural monopoly, also subject to price regulation.
Market consolidation in recent years means a small number of companies dominate the gas and electricity sectors. However, consumers still enjoy a wide choice – from about six major suppliers and several smaller ones. Ofgem has competition powers along with the Office of Fair Trading (OFT) to ensure there is no market abuse should any business begin dominate the market.
Great Britain has a free energy market. The EU directives on gas and electricity aim to open other markets up to competition.
