Making the UK energy industry as competitive as telecoms

The Competition and Markets authority (CMA) is investigating why competition is not working in the UK energy market. The investigation should report by the end of 2015, and meanwhile the CMA is publishing submissions from individuals and organisations on the CMA website.

My submission argues that the regulator is mistaken in believing that if customers regularly ‘switch’ between the ‘big six’ energy suppliers it indicates that there is a competitive market. Real competition means disruption of any traditional industry structure derived from the former monopolies. This disruption will happen in the UK because of the rise of micro-generation at the point of use, for example household solar. The CMA’s Issues Statement overlooks this very healthy trend and only asks how to preserve the old industry structure.

My own experience is with the very successful restructuring of the UK telecom industry in the 1990s. The telecoms market became highly competitive and an example for the world after controversial new regulation in the 1990s forced incumbent British Telecom to invest in opening its network to new entrants and modes of communication. A similar change could transform the energy market now, and I show that the UK has unique strengths to be a world leader in competitive energy provision. My submission shows how BT management vehemently resisted the new regulation even though that regulation quickly enriched their shareholders. A similar re-regulation will make the energy industry a market for communication of energy instead of purely for distribution of centrally-generated energy.

My paper is available on the CMA website: see Hugh Small CMA submission.

 

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