After two years, several delays and more than £5 million, the Competition and Markets Authority (CMA) has at last published its final remedies into how the UK energy market can go about regaining consumer trust and competitiveness.
The news, somewhat lost behind the Brexit shockwave that reverberated across Britain, is that not much has changed since the provisional remedies were published in March.
Critics have attacked the CMA for the predictability of its outcomes and raised questions about the investigation’s integrity as a public investment. However, on a more positive note, at least companies should be well prepared to absorb remedies that they have known are likely for months.
Briefly, the most prominent CMA remedies for the energy market are as follows: a safeguard tariff for pre-pay customers; an Ofgem-controlled database of disengaged customers; the removal of the four-tariff cap; and the scrapping of the price comparison websites confidence code.
The only material changes to the CMA’s provisional plans were that Ofgem will not be required to establish a price comparison service for domestic customers and that the CMA carefully reworded its assertion that suppliers had overcharged customers by £1.7 billion a year between 2009 and 2013. The report now states more mildly that customers could have saved £1.4 billion in a fully competitive market. It’s a subtle change, but one that will be important to suppliers and may stave off a legal challenge to the CMA, which was rumoured to be brewing.
Broader criticism of the CMA’s findings will be less easy to pacify, however, and the CMA’s decision to be less aggressive about overcharging will exacerbate accusations that it has watered down its report.
Lord Rupert Redesdale, chief executive officer at the Energy Managers Association, laughed at the timing of the publication coinciding with the EU referendum results, noting that it “wasn’t even trying to bury bad news, it was burying no news”.
Redesdale is not alone in feeling disappointed; the CMA’s own panellist, Martin Cave, concluded the report with a letter of dissent, outlining his belief that the remedies are not enough, while campaigners scaled the Authority’s offices in London last week brandishing banners that accused it of pandering to the big six.
Meanwhile, Energy and Climate Change Committee chair Angus MacNeil labelled the remedies “tepid”, and First Utility chief financial officer Darren Braham said the CMA has “completely missed the mark” and that there is a “real danger of being back where we started 10 years ago”.
The CMA has defended its final remedies, saying that its 30-plus measures included “significant technical and regulatory changes which will help modernise the whole market”, and “it doesn’t warrant” the description of a damp squib simply because draconian measures have not been imposed.
Whatever the sector’s thoughts, however, there will now be pressure from Ofgem for the remedies to be quickly adopted. The regulator’s chief executive, Dermot Nolan, made this plain in May when he warned that resistance would lead to heavy-handed intervention and potentially even price regulation.
Suppliers must therefore now initiate plans to adapt business processes and policies to accommodate the remedies – a process that is expected to be costly in financial, time and resource terms.
“Ofgem urges the industry to get behind the entire package of remedies and to work with us to deliver an energy market that works for both active and disengaged customers as quickly and effectively as possible.”
Dermot Nolan, chief executive, Ofgem
“After two years of investigation, announcements on remedies are a small victory for consumers and mark an important step to make the market fairer for all.”
Lewis Shand Smith, chief ombudsman, Ombudsman Services
“They’re being quite tepid about it. There are many areas where we will want to raise questions.”
Angus MacNeil, chair, Energy and Climate Change Select Committee
“The CMA investigation has been a waste of taxpayers’ money and is unlikely to re-establish consumer trust in the energy industry.”
Doug Stewart, chief executive, Green Energy
“It is a tough set of measures, but we recognise where it will help drive the energy market forward to better deliver for customers. We’ve come a long way since the investigation commenced in 2014 and we will continue to engage constructively as we undertake the substantial implementation work in the months ahead.”
Alistair Phillips-Davies, chief executive, SSE