Thursday, 21 November 2013


It has been suggested that David Cameron is considering launching an investigation of the energy market. Whether or not the ‘’Big 6’ energy cartel members are colluding to rig prices or deliberately exploiting excessive market power to fatten profits in an unfair way is perhaps open to question in some circles. From the perspective of the cartel members (and investors) if any investigation is launched then they (the ‘Big 6’) may argue that uncertainty will surround the energy industry.

If there is an investigation then if a Competition Commission inquiry may investigate whether there are structural flaws in the industry which mean that competition does not serve consumers' interests adequately. One significant question that should be asked (and hopefully answered) is whether it is good or bad for consumers, and for the economy for energy companies to both generate and sell energy to their customers.

Now it can be argued that the all in one generators and sellers of energy have little incentive to keep retail prices as low as possible, since higher prices boost the profits of their generators, not to mention the value of whatever gas reserves they happen to hold. It is also worth noting that if the energy industry is referred to the Competition Commission rather than to Ofgem (the current and fairly toothless energy regulator) then that pretty much puts the skids under Ofgem. Downing Street may believe that that is important to show that the big players in the energy industry suffer from behavioural rather than any structural weakness.  

Oddly enough there was a Conservative pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which was quietly dropped by the Com Dem Coalition Government in August 2010, when no doubt when they hoped no one would notice. Back in October 2009, the then Tory Energy Spokesman, Greg Clark has said that the "cartel" of the big 6 energy firms will be referred to the Competition Commission by an incoming Conservative Government.

He also said that there was an unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year. An 'independent' investigation in the Energy companies refusal to pass on reductions in wholesale energy prices to customers was also mooted along with an overhaul the energy sector billing structure and charges. 

Few people this winter will have as snug a relationship with the gas companies as that exists between the political parties (within the Westminster village) and the energy supply companies. Before the last Westminster general election, the Conservatives and the Liberal Democrats made repeated criticisms (and much political capital) from New Labour for its failure to tackle prices charged by the Big Six suppliers. Both the opposition parties publicly and repeatedly demanded an inquiry by the Competition Commission. 

Now don't get me wrong, an investigation sounds great, but, it was a Conservative Government that was responsible for starting the whole sorry mess by privatising the energy market in the first place. Throwing any rational energy pricing structure upon the whims of the alleged 'free market' by allowing the newly privatised energy companies to price gouge customers in the first place was a catastrophically bad idea. By the time the dust settles the fact that Conservatives pre election pledge ended being kicked into the long grass may well yet come back and haunt them before the next Westminster election. 

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