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CMA submission – The Market Commentators


In the latest in our series analysing the responses of key players to the CMA investigation into the UK energy market we focus on the market commentators and their thoughts on the investigation and its potential outcomes.

Their views make interesting reading from the critical to the sceptical and beyond.

Peter Atherton, an analyst at Liberum Capital has taken the sceptical route, calling into question the very grounds for the probe by saying:

“Reading Ofgem’s paper, there was no smoking gun. There was a series of long standing concerns, most of which Ofgem thought had been dealt with.

“The CMA inquiry is a little bit like moving the deck chairs around the Titanic.

“My guess is that CMA will find it’s a pretty competitive market. The question is: if the CMA gives the industry a clean bill of health, will politicians agree? It might not fit the narrative of continuing to beat up the industry.”

John Feddersen, from Aurora, the energy research company, echoed Atherton’s concerns and suggested political expediency could play a key role in the final conclusions of the probe:

“I still think the CMA could come up with some radical proposals, such as breaking up the Big Six, even if there is little justification to do so.

“It would not be hard to make such a recommendation — then the politicians take over and it happens.

“Where was the evidence for Labour’s retail price freeze? There wasn’t any.”

Nigel Cornwall, from Cornwall Energy, the energy consultancy, however criticised the suppliers for bringing the ultimate consequences on themselves whilst not being drawn on likely outcomes:

“The Big 6 have been complacent. It had not occurred to the big energy companies until about five years ago that consumers should get timely and accurate bills. Ofgem’s investigation and its reforms have shaken them up.”

Finally Richard Hall, from Citizens Advice, cautioned that the CMA probe may prove a false dawn despite best intentions:

“For the CMA to be successful, it needs to provide the consumer with a lasting assurance that energy prices are fair.

“My worry is that there will be a temporary shutdown of public debate after the investigation, only for it to re-emerge 12 months later.”

Most commentators expect the CMA to ultimately focus (or depending on how uncharitable they feel ‘to limit’) its recommendations on improving engagement and switching among “legacy customers” who have never changed supplier and remain on the most expensive deals.

However there is also a groundswell of support for more radical intervention for such customers to be moved on to a cheaper, government-mandated tariff and for the competition watchdog to also give guidance on acceptable profit margins from supplying energy.

Quite how that would play after May 2015 with a likely Conservative administration is an interesting question as is the prospect of direct regulation of prices and profits from a Tory government.

On balance therefore the commentators view is comes across as one of suspicion and cynicism as to the potential impact of the probe. Whilst they may have a point we can’t help feel that this is a shame, certainly the over-simplistic and dismissive nature of some of the comments is unhelpful in the context of very real market issues. It is to be hoped therefore that the probe itself focus on its own findings and not the opinions of the City.

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