Utility Week

6 | 6TH - 12TH JULY 2018 | UTILITY WEEK News Inside story 'A market for an essential service which is presently working very badly for most British households." That was the damning verdict on the energy market issued almost exactly two years ago by the man revealed last week by business secretary Greg Clark as his pick for the chairmanship of Ofgem. The line is taken from the conclusion of Professor Martin Cave's dissenting report on the Competition and Market Authority's investigation into the energy market. The two-and-a-half page statement, tucked away at the back of the report, has turned out to be more influential than the rest of the 1,423-page document put together. This is because the government has adopted the academic's recommenda- tion that a temporary price cap should be imposed on the default tariffs that the bulk of customers use. Cave was pretty damning about the report's other remedies, which he described as "untried and untested" and which would take "some time to come into effect" for the majority of households. He added that it would be "good" if the measures, including the smart meter rollout, work rapidly. But he wrote that he was "far from confident" that they would and that any evidence that they will be effective is "conjectural or limited". Cave's appointment, which was subject to confirmation by a hearing of the Depart- ment for Business, Energy and Industrial Strategy select committee as Utility Week went to press, shows that the wind of change signalled by energy minister Claire Perry ear- lier this year is now blowing through Ofgem's corridors. Current chairman David Gray has been strongly associated with the pro-competition stance that was until recently the hallmark of his organisation's approach to energy prices. The professor's appointment has won applause in Parliament where Ofgem has become a whipping boy over the past 18 months. Many MPs believe the regulator has dragged its feet tackling what they perceive as overcharging by suppliers. The appointment has clearly delighted John Penrose, the backbench MP who was ringleader of cross-party efforts to cap energy prices. The Somerset MP, who has been one of Ofgem's fiercest critics, says: "This could be an inspired appointment. Martin Cave was the only person to stand up for an energy price cap when CMA did their review, so with any luck he will push for the energy customer to be king, rather than being taken for granted by the big six. "He will have his work cut out at Ofgem. I'm sure we all wish him the very best of luck." Alan Whitehead, Labour's shadow energy spokesman, says Cave's appointment sug- gests a stronger read across between the gov- ernment's aspirations and implementation on the price cap. "You could see that working better than was the case previously," he says, highlight- ing the "crucial role" that Ofgem will play in the design and delivery of the cap. Customer's perspective Tony Smith, chief executive of the Consumer Council for Water, says Cave was "very keen" to hear the customer's perspective during the study into competition in the water indus- try, which he undertook for the government nearly a decade ago. Stuart Cook, managing director of consul- tancy Complete Strategy, is a former senior partner at Ofgem. He views Cave's support for the price cap through the lens of wider political and con- sumer dissatisfaction with excessive charges. "Whatever economists may think, the reality is that politicians and society as whole have a different view." But he points out that Cave's outright dis- sent only materially extended to one, albeit very important, aspect of the CMA's list of remedies. Overall the regulator will be in safe hands under the stewardship of Cave, thanks to his wide-ranging experience of regulated mar- kets both in the UK and abroad, says Cook: "They've recruited someone with a very stra- tegic economic and regulatory pedigree. Cave takes the reins David Blackman reports on the provisional appointment of Professor Martin Cave as the new chairman of energy regulator Ofgem. Cave on… COMPETITION IN THE WATER SECTOR, 2011 "While the water industry has delivered much over the last 20 years, the task of meeting ever-higher customer expectations and tackling the new challenges facing the industry, particularly climate change and population growth, will require alternative approaches and new ways of working." THE CMA ENERGY MARKET PROBE, 2016 "I respectfully disagree with my colleagues over an important aspect of the remedies adopted for the domes- tic retail energy mar- ket. I do not oppose the proposed remedies, but I do not think they go far enough. It would be very good news if they did work speedily, but I am far from confi- dent that they will." HIS PROVISIONAL OFGEM CHAIRMAN APPOINTMENT, 2018 "Seismic change is afoot in this sector and I will work to ensure that the regulator con- tinues to protect con- sumers while working with government and those across the sector to build an energy sys- tem fit for the future."

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