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CMA Findings – No Big 6 break up on the horizon

Amongst the less trumpeted headlines from the CMA, Competition and Markets Authority, investigation into the energy market has been a very sCMA logosignificant finding.

Whilst the headlines have been hogged by the spectre of energy suppliers ‘punishing’ loyal customers – we would say exploiting apathy – a much more significant conclusion has been drawn.

The CMA have rejected suggestions from the regulator, Ofgem, and other commentators that the Big 6 energy suppliers receive an unfair benefit by virtue of having their own generation as well as retail (supply) arms.

The loudest hyperbole had focussed on a forced break up of such businesses if such distortion was concluded with Secretary of State for Energy and Climate Change Ed Davey having claimed:

“I’ve always said if there needs to be further action I certainly wouldn’t shrink from seeing an energy company broken up but that has to be done with real evidence. If the evidence from the CMA is that the next step ought to be broken up, I as a Liberal Democrat will make it clear we wouldn’t flinch from taking that tough action.”

But the CMA’s initial findings appear to suggest Davey need not worry about flinching,

The CMA, in their preliminary report, found that smaller and new entrant energy suppliers were able to purchase their energy requirements in the market on futures contracts and as such, being able to access the market in this way, the status or otherwise of their competitors was not a relevant barrier.

The CMA found that:

“Our analysis suggests that the Six Large Energy Firms (the Big 6) generally hedge further forward than independents but that external product availability is good enough for independent firms to match the Six Large Energy Firms’ hedging strategies”

It might not have made headlines but this remains the clearest conclusion yet from the CMA – there will be no break up of the Big 6. Whether the same can be said of the regulator is another matter entirely.