Yeo wrote to the CMA urging the authority to reconsider its decision not to investigate wholesale gas market competition, saying the probe would be “compromised from the outset” due to the dominant role the market plays in determining the cost of power generation and household heating.
But the CMA responded saying: “We signaled in our Issues Statement that ‘we will consider to what extent (retail) price changes seem to be associated with changes in wholesale costs’. We very much recognize this issue and we will be looking at it in detail.”
The letter, from the CMA’s panel head Roger Witcomb, repeated Ofgem’s findings that the UK’s wholesale gas market is more competitive than the electricity market, which will form part of the investigation.
The UK gas market is one of the most liquid energy markets in Europe with strong connections to Continental Europe and the global gas market via deliveries of liquefied natural gas (LNG). As a result around 60-70 per cent of all EU gas trade takes place via the UK hub, meaning the market contains a mix of diverse market participants and little room for one party to abuse a dominant position.
The CMA added that although it does not view the gas market as a key focus for the investigation at this stage it would be open to a refocus “as further evidence emerges”.