Is over-regulation causing energy prices to leap?

12th August 2014
Is over-regulation causing energy prices to leap?

The possibility that the energy market is over-regulated has been blamed for an increase in monthly bills.

This is according to five former energy regulators, who believe this may have hampered healthy competition among providers since 2008.

It has been suggested that Ofgem's attempts to alter the way in which the industry functions has brought about additional costs, while some energy suppliers have had no choice but to discontinue some of their cheaper tariffs for consumers.

These voices of discontent come from figures such as Sir Callum McCarthy, who was in charge of Ofgem from 1998 to 2003 and Stephen Littlechild, former head of electricity regulation from 1989 to 1998. 

They wrote to the Competition and Markets Authority (CMA), which recently set up an inquiry to ascertain whether or not gas and electricity suppliers can increase prices to the consumer – despite the fact wholesale prices have been on the decline. 

In this correspondence, they highlighted that while intervention had taken place in a bid to bolster consumer engagement, this could actually cause customer costs to take a hike and lead to weaker levels of competition. 

While Ofgem revealed it would take these opinions into consideration, it refuted the idea that regulation and competition started to be detrimental from 2008 onwards, having previously been effective.

A spokesperson for the body 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."

Energy prices have frequently made the headlines recently as the number of households thought to be living in fuel poverty this year is believed to be around 2.28 million.

In addition, a survey from the Kingfisher Group showed that rising energy bills were the number one cause of worry for individuals, far ahead of mortgage or rent payments. 

Comments:

Mark Porter: It wouldn't surprise me if this was true.

Bethan Wilson: Less talk, more action – lower my energy bills please! 

Oliver Handforth: LED light bulbs are a good way to lower my bills. 

Posted by The EnerGenie

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