In its initial submission to the CMA, SSE chief executive Alistair Phillips-Davies said the company “strongly disagrees” with Ofgem’s suggestion that a possible tacit collusion between energy companies is to blame for consistently rising retail bills.
“SSE has competed hard against larger and smaller suppliers alike to grow from the fifth to second largest GB retail supplier and it does not believe market conditions or suppliers’ behaviour support this academic theory of market behavior,” Phillips-Davies said.
SSE added in its submission that there is “no evidence of any adverse behavior” with all indicators suggesting that the market works well.
“The conditions simply do not exist for market power and no additional action is necessary,” SSE said in relation to one of the CMA’s key theories of harm that the ‘market power’ of the big six leads to higher retail bills.
The company added that while many Ofgem policies have resulted in better outcomes for energy consumers, “certain aspects of these interventions have had unintended adverse effects”.
SSE echoes calls from Centrica and former energy regulators to investigate the impact of Ofgem’s intervention in the market.
For example, SSE said that low liquidity in certain areas of the wholesale electricity market is likely to have more to do with policy intervention than vertical integration.
“In particular, the Carbon Price Floor has had a negative impact on long-term liquidity due to uncertainty around future levels, which can be changed at every Budget,” SSE said.
On the retail side of the market SSE said Ofgem’s rules limit innovation in terms of what suppliers can offer whilst making bills and switching “confusing” for customers.
“Ofgem’s drive for tariff simplicity and non-discrimination is curtailing suppliers’ ability to innovate and tailor products to customers’ personal needs and circumstances while leading to a prohibition of previously popular choices such as fixed discount tariff s and prompt payment discounts,” SSE said.
“The current regulatory requirements make the bills lengthy and complex (3-4 pages on average), which can confuse customers,” the company added.
Overall though, SSE believes that there is sufficient consumer engagement with energy suppliers.
“If we look at switching (which is not the only metric for measuring customer engagement), 70% of our customers have switched to SSE from another supplier over the last ten years (including many customers who switched away from SSE and then switched back). Of the remaining 30%, the majority have proactively engaged in the market by switching their tariff or engaging with us in other ways,” SSE said.