Former regulators claim energy sector is ‘over-regulated’
A group of former energy regulators have said that since 2008, Ofgem has implemented too many regulations and hindered competition in the industry
The former regulators laid out their arguments as part of the Competition and Markets Authority’s (CMA) ongoing investigation into the energy market.
According to the group, Ofgem’s excessive regulation may have, since 2008, imposed extra financial burdens on energy companies, consequently reducing competition as well as forcing suppliers to cut some of their cheapest energy tariffs.
The former regulators include Stephen Littlechild, head of electricity regulation from 1989 to 1998, Sir Callum McCarthy, head of Ofgem between 1998 and 2003 and Clare Spottiswoode, head of gas regulation from 1993 to 1998.
Ofgem: ‘Current problems […] in the energy market were showing before 2008’
Ofgem vehemently denied that it had created an over-regulated industry and said many of the issues mentioned, date back to pre-2008.
In a statement the energy regulator said: “Many of the current problems with retail competition in the energy market were showing before 2008 and the regulatory and policy environment has changed significantly since then.
“Our reforms to make the market simpler, fairer and clearer for consumers have been in place since earlier this year with the aim of tackling some of the issues affecting competition.”
The energy watchdog added that the views and opinions of the former regulators would be taken into account, with a view towards improving future performance.
Higher costs and fewer tariffs
As part of their submission to the CMA, the former regulators said that Ofgem’s attempts to increase consumer engagement in the energy market could have led to higher costs for suppliers and higher energy bills.
The group added that Ofgem’s decision to simplify the market by reducing the number of tariffs available also meant that plans aimed at vulnerable households have disappeared.
The CMA’s investigation into the energy market is due to run until December 2015. Investigators have already laid out a number of potential issues facing the energy industry.
One of these is that regulatory interventions have reduced the incentives for energy suppliers to offer competitive prices.