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UTILITY WEEK | 1ST - 7TH MAY 2015 | 13 E L E CT I O N C O U N TD O W N : 6 D AY S TO G O I n the Civil Service, there has long been a phrase used to categorise a report that will never see the light of day: it is "kicked into the long grass". In the energy sector, the long grass has sprouted roots in recent months as more difficult issues are thrust on the Competition and Markets Authority (CMA). The most prominent inquiry surrounds the energy market, its competitiveness – or lack of it – and the prices charged by the big six. In particular, Centrica's domestic gas market share is under scrutiny. The whole energy market issue has been thrown at the CMA, which – not surprisingly – is focusing on a few particularly controversial issues, such as vertical integration. The CMA is also charged with ruling on the appeal from Northern Powergrid over its distribution charge final determination, with which the latter profoundly disagrees. To top it all, Centrica has entered the electricity distribution regulation debate, despite not being an electricity distribu- tion business. Its involvement as an interested party is certainly novel – and what it seeks to achieve is unclear. On the water front, the CMA is also due to decide Bristol Water's appeal against its periodic review final determination. The £132 million gap between Bristol and Ofwat is vast and the disagreement deep. While the outcome of the CMA's utility inquiries will post-date May's general election, there is no guar- antee that whichever government eventually results will implement its recommendations. The CMA may also be directly affected by radical proposals that have been put forward by opposition parties. Labour's unequivocal stance on energy policy has been clear for some time. Its leader, Ed Miliband, has pledged a freeze in energy prices until 2017. Importantly, the Labour Party has been visceral in its criticism of Ofgem, which it plans to abolish. It also seeks to overhaul the energy trading market, but whether it adopts the CMA's recommendations on vertical integration is far from clear. The likely kingmakers in any coalition, the Scottish National Party, have endorsed several of Labour's energy policies. As for the CMA, as more utility hot potatoes are lobbed in its direction, it can only plough through the mounting pile of inquiries – and hope that at least some of its recommendations are taken up. Nigel Hawkins, director, Nigel Hawkins Associates Talking points THE £132M GAP BETWEEN BRISTOL AND OFWAT IS VAST AND THE DISAGREEMENT DEEP "The CMA must hope at least some of its recommendations are not kicked into the long grass." result of spending cuts, and more than 80 per cent of Defra's budget is delivered through executive agencies and arm's-length bodies. But closing down Defra would be messy, leaving 35 partner bodies looking for new homes and parent depart- ments. What looks certain, however, is that cuts will limit further Defra's ability to be more than an umbrella organisation. State of competition Energy: Domestic market share of the big six as of February 2015: 92.4% – down from 99.8 per cent in 2009. Number of domestic energy suppliers in the market in 2015: 22 – up from 12 in 2008 ENERGY SWITCHING STATISTICS (BY NUMBER OF METER POINTS) Water (non-domestic), Scotland, 2015: 18 firms Number of competitive suppliers in 2015 1 firm Number of competitive suppliers in 2008, Scottish Water (incumbent) Budgetary cuts: £83 million Savings Decc has to deliver in 2015/16 £54m Savings Defra has to deliver in 2015/16 £3m Ofgem's budget reduction this year £10m Ofwat's budget reduction this year felt the need to refer the sector in the first place, shows there are concerns about how effectively competition is working. Sticky customers, a lack of trust, and a belief that prices "go up like a rocket and down like a feather" are symptoms of a market that is fail- ing to function, they say. However, doing away with com- petition is not the solution, accord- ing to Michael Liebreich, chairman of Bloomberg New Energy Finance. He says direct intervention and regu- lation, such as in the Soviet Union, did not fail because of a lack of intel- ligence or planning, but because they lacked market forces and price signals. Regulation and competition are both here to stay. However, the extent to which regulation and intervention encroaches into a free market is very much open to debate. and Defra? May 12 Jun 12 Jul 12 Aug 12 Sep12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 jan 15 Feb 15 Mar 15 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 ➟ ➟ ➟