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CMA Stands Firm on the Lack of a Wholesale Gas Probe

CMAFollowing Tim Yeo’s call for the Competition and Markets Authority investigation to include a probe into the wholesale gas markets, the CMA has committed to consider the gas market’s impact on bills but has falling short of the Energy Select Committee Chairman’s call for a detailed focus on the market itself.

Yeo had said that the probe would be “compromised from the outset” if the gas wholesale market wasn’t a key focus of the investigation.

Yeo highlighted the significant role that gas plays as both a direct energy source and as a major contributing factor to the cost of electricity generation and therefore the electricity retail price that is the core focus of the probe.

Although the UK gas market is one of the most liquid energy markets in Europe with strong connections to Continental Europe and the global gas market via deliveries of liquefied natural gas (LNG) concerns remain over its intrinsic influence on the wider energy market and whether a valuable conclusion can be made from the probe without due consideration of the dynamics of the gas market.

This feels unsatisfactory, whilst competition and liquidity are higher in the gas wholesale and retail markets than in the corresponding electricity sector, the influence the former has on the latter suggests more than a cursory glance is required.

The decision to dismiss the wholesale gas market from the investigation is therefore an on-going concern.

The CMA are currently unmoved on the issue however, although they have committed to a potential refocusing on the gas wholesale market if findings under the initial remit suggest further investigation is required.

The CMA’s panel head Roger Witcomb said:

“We signalled in our Issues Statement that ‘we will consider to what extent (retail) price changes seem to be associated with changes in wholesale costs’. We very much recognize this issue and we will be looking at it in detail.”

The irony of course is that if it is working as well as the CMA and Ofgem confidently suggest then any additional focus would be speedy and concise as a clean bill of health is delivered. One wonders why, given their confidence, the CMA didn’t choose to seize the initiative and deliver the promised all encompassing probe once and for all.

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