Existing industry regulators like Ofgem and Ofwat should be replaced with a single watchdog to oversee all utility network functions, a Tory MP has urged.

Last week the Treasury announced that it has asked the National Infrastructure Commission (NIC) to carry out a review of energy, telecoms and water regulation. 

Conservative MP John Penrose, who was one of the leaders of the backbench parliamentary campaign to introduce a price cap on standard variable tariffs, called at a fringe meeting at last week’s Conservative party conference for the existing system of industry-specific regulation to be scrapped.

However network function would require ongoing regulation because they are monopolies, he said: “There is a network monopoly at the heart of most of these privatised utilities. We need something to regulate that otherwise they will rip off customers: we need something regulating that market.”

But regulation should be lifted from other aspects of the industry’s activities, Penrose said: “For all the other bits and pieces, let competition rein and find ways of creating more competition in those industries.

“Its job would be to get out of the way and let competition bloom in all those industries and make sure you and I have the choice, which we increasingly expect in every other avenue of our lives whether buying a tube of toothpaste or a coffee.”

The Somerset MP, who heavily criticised Ofgem during his energy prices campaign, said the existing regulators are “part of the problem” because they are “holding companies back and failing you and I as consumers”.

Penrose was backed by his fellow Conservative MP John Redwood. He said: “The best regulation is competition and the main change we want to see is the regulator being told to drive more competition and rely less on rules and price caps which are not nearly as good as a competitive market to keep prices honest and keep people innovating and investing.”

The Environment, Food and Rural Affairs (EFRA) select committee‘s report on water regulation, published today (9 October) but signed off before last week’s announcement, recommends that the review should consider whether the industry’s regulation is fit to meet future needs like drought resilience, as well as delivering value for money for customers.

This should include whether the existing price review cycle is too short to allow the industry to plan long-term, the report recommends.

The committee also says water needs a “strong, independent” regulator, putting itself at odds with the Labour party’s plans to absorb regulation into the government if it nationalises the industry.

The NIC said its remit will include the key drivers of the change affecting the regulated sectors over coming decades and whether the regulatory model encourages sufficient competition and innovation to support the efficient delivery of infrastructure.

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