A good day for bad news

Issuing bad news on a busy news day is a a pretty common ploy. This time it’s the Competition and Market Authority (CMA) report on energy market pricing, slipped out last Friday amongst the post-Brexit row. On reading it you can see why. A two year investigation has resulted in few significant actions and won’t solve the problems in the energy markets.

There will be no action to challenge market domination by a “big six”: Centrica, SSE, EdF, EoN, Scottish Power and Npower – who control around 90% of the sector.

Despite championing switching as the solution, the CMA found that more than half of customers never switch their suppliers and around 70% are on the most expensive tariffs. This is apparently all the customers fault, ignoring market domination and switching abuses. There will be a price cap for vulnerable customers. However, only for prepayment meters (just 16% of domestic users).

According to the CMA it’s also the fault of the measures introduced after Ofgem’s Retail Market Review in 2010 that they claim made markets less competitive. These aimed for “simpler, clearer and fairer” conduct in pricing energy, including lowering the number of tariffs each supplier could offer to four. Ofgem also required price comparison websites to provide full rather than partial information about available offers.

The CMA have ignored the widespread dissatisfaction when each supplier offering a large number of tariffs which many customers found complex and confusing. Their approach prioritised “competition” over social and consumer welfare. It’s competition at any cost, be it through artificial complexity created by extra tariffs or information withholding by comparison websites.

The GMB union has slammed the report for being “toothless” and “watered down” and has called for the CMA to be abolished. GMB national secretary Justin Bowden said: “The CMA is a toothless waste of space that should be abolished and replaced by government itself taking over the regulatory role with powers to cap prices subject to control by Parliament. And as for the CMA report, it spends over a thousand pages simply tinkering with a broken and failed model for the UK electricity supply sector.”

Martin Cave a CMA panellist on the investigation has expressed concern that the remedies do not go far enough to fix the market, and called for wider price controls to protect consumers. He said that the proposed remedies will take time to come into effect and are untried and untested, which makes it “risky to rely on them”.

This dismal report fails to recognise the market failure of privatisation. In 2014 British households spent 75% more for electricity and 125% more for gas in real terms than they did in 2004. This is despite the fact that gas consumption declined by around 30% in the same period while electricity consumption went down by around 15%.

It is high time that the public sector takes control of the UK’s energy through nationalising the industry progressively over time. This would not only eliminate abuse of market power by big players, but also secure the UK’s future energy supplies and reduce its carbon emissions.

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