Ex-regulators fear Ofgem reforms reduced competition

Changes to the energy market by watchdog Ofgem may have led to “weaker” competition between suppliers, five ex-regulators suggested this week. Their comments imply less choice for tariffs may have […]

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By Vicky Ellis

Changes to the energy market by watchdog Ofgem may have led to “weaker” competition between suppliers, five ex-regulators suggested this week.

Their comments imply less choice for tariffs may have been available to consumers as a result.

Ofgem’s interventions in 2008 – after they were at the helm – meant the domestic energy market “started to take a radically different path”, according to the former senior officials.

They include Sir Callum McCarthy, Chairman and Chief Executive of Ofgem and its governing body GEMA from 1998 to 2003 and Stephen Littlechild, who from 1989 to 1998 was Head of Ofgem’s predecessor, the Office of Electricity Regulation (Offer).

The energy market has been referred to the Competition and Markets Authority (CMA) for an 18-month-long review.

In a letter to the CMA about the review, the five former officials say: “Regulatory interventions… to promote more consumer engagement can increase customer and supplier transactions costs, leading to lower customer benefits including via higher prices, and weaker rather than stronger competition.”

They add: “Regulatory interventions can also affect suppliers’ ability to compete as well as their incentives to do so.”

13th Aug - Ofgem Timeline2

The former regulators also warn the competition inquiry should be as “unbiased” as possible, raising concern about Ofgem staff working on the review. Three out of four reports mentioned by the CMA are by Ofgem, they say.

Other signatories who have all held a string of roles at UK energy regulators include Eileen Marshall, one-time Managing Director at Ofgem; Stephen Smith, Managing Director for Markets at Ofgem (2004-2007) and Clare Spottiswoode, Head of Ofgas (1993–1998).

Ofgem stringently rebuffs the comments, claiming its reforms had “good results” for consumers.

A spokesperson said: “Many of the current problems with retail competition in the energy market were showing before 2008 and the regulatory and policy environment has changed significantly since then. Our reforms to make the market simpler, fairer and clearer for consumers have been in place since earlier this year with the aim of tackling some of the issues affecting competition.”

They added: “Referring the energy market to the CMA will help to ensure that no stone is left unturned to make sure that competition is bearing down as hard as possible on prices…we have made it clear that we would fully expect them to look at the regulatory framework and the actions we have taken to intensify competition and protect consumers.”