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UK Utility Watchdog Demands Competition Probe Into Energy Market
Tuesday, May 20, 2008
The head of U.K. utility watchdog Energywatch Tuesday demanded a Competition Commission inquiry into gas and electricity markets, which he said are structurally uncompetitive and moving in the wrong direction.
"I call on the Competition Commission to put the cleaners through this sclerotic market," Energywatch Chief Executive Allan Asher told a parliamentary inquiry into the energy sector.
Asher said the 'big six' U.K. utilities aren't competing fiercely enough with one another on prices, resulting in a gap between the highest and lowest dual fuel tariffs of just pence a week.
The vertical integration of the six companies, who own power generation and gas supply assets and have millions of retail customers, is shutting out new entrants, he said.
"No generator will enter this market...because vertically integrated companies own all of the customers," he said.
Equally, companies that may want to compete on the retail side can't do so because they would have to buy all of their power and gas from the incumbents, Asher said.
"We've seen 40 companies exit the market in the last 10 years and not one new entrant that has been sustained," he said.
In this situation, separating power generation and retail businesses would be "economically sensible", Asher said. He said the big six companies shouldn't be allowed to dominate the development of new wind and nuclear power, adding selling independent nuclear generator British Energy PLC (BGY.LN) to one of these companies would also hinder competition.
British Energy is up for sale and four out of the big six utilities - Centrica PLC, RWE, EDF and Iberdrola (Scottish Power's parent company) - are in the running for a takeover. The other two of the six are Scottish and Southern Energy PLC and E.ON.
Asher also said the current investigation into competition in the utility sector by regulator Ofgem is insufficient.
"Ofgem isn't set up to do big studies...their staffing, level of expertise and experience isn't up to it," whereas the Competition Commission is "ready, willing and able" to do a thorough inquiry, he said.
The Competition Commission would have the power to force renegotiation of anticompetitive gas and power contracts or force the breakup of the vertically integrated utilities if it wanted to, Asher said.
This article was featured on CNNmoney.com
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