More energy regulation = more competition

According to The Guardian, the government has paid energy companies £1bn in advance for insulating homes but they have not done it:

http://www.theguardian.com/environment/2013/nov/15/energy-firms-green-measures-big-six

Some cynics might claim that energy companies are dragging their feet because they have a conflict of interest: insulating the UK’s homes would reduce company revenues. But you should never attribute to dishonesty what can be explained by incompetence. As a management consultant with experience of regulating mature industries I can assure you that energy companies simply do not have (and should not have) in-house skills in the innovative competitive marketing needed to sell insulation as a consumer service, even if they subcontract it. Energy companies are oligopolistic low-competition suppliers of a basic commodity and are regulated to prohibit them from diversifying into other areas which necessarily involve business risk. The government has paradoxically given them a monopoly of a £1bn insulation subsidy only because it believes it  can combine the two goals of reducing energy consumption and compensating the energy companies for the resulting loss of revenue. This won’t work. Energy companies work best when they ‘stick to their knitting’ of providing energy at lowest cost.

Environmentalists should campaign hard for the £1bn insulation subsidy to be paid to start-ups or other companies who can bring innovative marketing techniques and risk capital to this highly competitive market. To avoid dominating this new market, energy companies should be prohibited from selling insulation services just as they are prohibited from gambling in and dominating other competitive markets. These ‘Line-of-business restrictions’ are essential to promote both competition and process improvement in the dominant operators.

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