Ed Davey has warned Dieter Helm not to repeat the mistakes of the Competition and Market Authority (CMA) energy investigation in focusing too heavily on the electricity market.
The former energy secretary said the CMA “missed opportunities” in its two-year review, released last year, and expressed hope that the much-anticipated new review would take a wider angle.
Davey told Utility Week: “I think the CMA missed opportunities during its review to promote more competition, particularly failing to look into new business models that new technology is facilitating that will aid competition, and to look at the dominance of British Gas in the domestic gas market.
“This was a frustration for me because I did write to them specifically to look at these issues. At least the [new] review has the benefit of the excellent new Ofgem thinking on flexible markets.
“As secretary of state, I argued both to the CMA and Ofgem that for domestic consumers the issue was really heating as gas makes up around two thirds of the average bill. They were rather too focused on the ill-judged criticisms of some newspapers and the Labour opposition who all seemed to ignore the heating side of the bill.
“I really hope that Dieter Helm doesn’t make the same mistake, even though his main expertise is in the power market, and he has been a champion of gas for a few years.”
The government appointed Helm to lead the price review last week. The Oxford University economist last year called on business and energy secretary Greg Clark to develop a more comprehensive energy strategy.
Helm has courted controversy in the past over his criticism of the price of renewable energy. But former Npower chief executive Paul Massara said he hoped the academic would show a more flexible approach.
“There are new developments to consider, such as with smart grids and offshore winds, so hopefully this will provoke new thinking and not falling back on historical views.
“The CMA was looking much more about the structure and the retail market in the energy industry, and not the technology base. The review panel will be looking at cost of technology and what that means for the consumer.”
However, Massara said the relatively short timescale for the review meant it would be limited in scope.
“I think that there is not a clear strategy of the total decarbonisation of energy produced. And I don’t think a three month review is going to get anyone anywhere on that, it is a long term issue.”
The former CEO also criticised the minimal role that smart meters are likely to have in Helm’s review.
“Smart meters are an important in the smart grid, as they are an enabler for consumer billings and technological advance of the grid, looking at how consumers can engage and manage their energy costs, through vehicles such as the internet.”
Helm will be assisted in the review by a number of high-profile industry figures. These include former Conservative MP Laura Sandys, now chief executive of Challenging Ideas, and former National Grid executive director Nick Winser. Massara added that he hoped they would help give more balance to the review’s conclusions.