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UtilityWeek_010716V2

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Policy & Regulation 10 | 1ST - 7TH JULY 2016 | UTILITY WEEK Analysis A er two years, several delays and more than £5 million, the Competi- tion and Markets Authority (CMA) has at last published its final remedies into how the UK energy market can go about regaining consumer trust and competitiveness. The news, somewhat lost behind the Brexit shockwave that reverberated across Britain, is that not much has changed since the provisional remedies were published in March. Critics have attacked the CMA for the pre- dictability of its outcomes and raised ques- tions about the investigation's integrity as a public investment. However, on a more posi- tive note, at least companies should be well prepared to absorb remedies that they have known are likely for months. Briefly, the most prominent CMA rem- edies for the energy market are as follows: a safeguard tariff for pre-pay customers; an Ofgem-controlled database of disengaged customers; the removal of the four-tariff cap; and the scrapping of the price comparison websites confidence code. The only material changes to the CMA's provisional plans were that Ofgem will not be required to establish a price comparison service for domestic customers and that the CMA carefully reworded its assertion that suppliers had overcharged custom- ers by £1.7 billion a year between 2009 and 2013. The report now states more mildly that customers could have saved £1.4 billion in a fully competitive market. It's a subtle change, but one that will be important to suppliers and may stave off a legal chal- lenge to the CMA, which was rumoured to be brewing. Broader criticism of the CMA's findings will be less easy to pacify, however, and the CMA's decision to be less aggressive about overcharging will exacerbate accusations that it has watered down its report. Lord Rupert Redesdale, chief executive officer at the Energy Managers Association, laughed at the timing of the publication coinciding with the EU referendum results, noting that it "wasn't even trying to bury bad news, it was burying no news". Redesdale is not alone in feeling disap- pointed; the CMA's own panellist, Martin Cave, concluded the report with a letter of dissent, outlining his belief that the rem- edies are not enough, while campaigners scaled the Authority's offices in London last CMA reveals final remedies Industry reaction to the Competition and Markets Authority's remedies for the energy market has been broadly critical, with many accusing it of not going far enough. 26 June 2014 – Reference made by Ofgem October 2014 – Hearings February/ March 2015 – Further hearings CMA energy probe timeline July-September 2014 – Initial information requests; initial submissions from main and third parties; publication of initial issues statement September 2014 – Site visits, issue questionnaires January/February 2015 – Publication of relevant working papers and annotated issues statement March 2015 – Deadline for all parties' responses/ submissions required before provisional findings July 2015 – Notified provisional findings and possible remedies AVERAGE SVT PRICE (BASED ON THE ANNUAL BILL FOR A DUAL-FUEL DIRECT DEBIT TYPICAL CONSUMPTION) AND A FORWARD-LOOKING INDUSTRY-LEVEL BENCHMARK OF DIRECT COSTS 1400 1200 1000 800 600 400 200 0 £ per customer per year Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Simple average dual-fuel bill, standard variable tariff (direct debit) Source: CMA 1 year cost benchmark (energy, network and policy costs) Bill is an average across regions and six large energy firms, for a typical customer. Direct costs are not those actually incurred by firms, but forward-looking expectations. Indirect costs are not shown

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