Competition referral can only do good

“When you ain’t got nothing, you ain’t got nothing to lose.” The wisdom of Bob Dylan could fairly be applied to the energy supply sector this week, with Ofgem expected to fire the starting gun on a Competition and Markets Authority referral on Thursday, after Utility Week went to press. Perhaps the only surprise here was the degree to which sections of the market cranked up the publicity machine in opposition to a referral at the beginning of the week. Why bother? Public perception of energy suppliers is at an all-time low, the energy secretary is personally intervening with sledgehammer hints about breaking up the biggest supplier, and the regulator is set for the chop.

It is hoped that a CMA referral will take some of the political heat out of the situation. It should mean that crucial decisions about the structure of the energy market are made by independent experts, not by opportunistic or defensive politicians. The CMA is more secure and thus more able to rise above political pressure than Ofgem is. It will report back after the 2015 election, by which point whichever party or parties are in government will be at the beginning of their term and in a position to undertake structural market reform without an eye to immediate vote-grabbing. The question of whether energy suppliers are profiteering can be put to rest – with evidence, with independence, with transparency.
The biggest objection to a CMA referral is that it will create an investment hiatus. But that happened when Ed Miliband took to the stage in Brighton last year – and even earlier, with the confusion and scanty detail of Electricity Market Reform. As Nigel Hawkins writes for us this week (p14), the commitment of the major European utilities to the UK market is already looking doubtful. And as Trevor Loveday points out on p7, the carbon floor price freeze is another body blow for investment in renewables.
So let’s get real. The political and public agenda has changed the answer to the energy trilemma. For now, affordability and security of supply trump sustainability. As affordability is seen to by the CMA, and security of supply by a pragmatic approach to reserve capacity overseen by National Grid, sustainability will be left blowin’ in the wind.