Utility Week

UTILITY Week 14th October 2016

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UTILITY WEEK | 14TH - 20TH OCTOBER 2016 | 11 Policy & Regulation Analysis P rime minister Theresa may has set out her ambition to create "a country that works for everyone" – a typical slogan to accompany any party conference. In her keynote speech, she set out how the Conservative government would achieve this. It is a lurch to the le, into traditional Labour territory of market intervention, employee representation and defence of the vulnerable, that is proposed. She told dele- gates: "Where markets are dysfunctional, we should be prepared to intervene. "Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by delib- erately complex pricing structures, we must set the market right." May added: "It's just not right that two- thirds of energy customers are stuck on the most expensive tariffs." This came aer business and energy sec- retary Greg Clark said that, in the wake of the £2 billion customer detriment reported by the Competition and Markets Authority (CMA), "it is our duty to act". Details of the planned government inter- vention are expected to emerge in the coming weeks and months, but there are rumours that they will seek to extend the price con- trols the CMA set out in its remedies. This could put a stronger focus on pro- tecting vulnerable consumers, and extend- ing the reach of the safeguard tariff – which is currently set to be introduced for four million prepayment meter customers out to 2020. Suppliers have been warned, and they are not pleased. British Gas managing director Sarwjit Sambhi says the move is regressive and will hamper retailer innovation, such as the development of connected home devices like as Hive. He says the CMA's remedies should be allowed to bed in before any further inter- vention is made. "There is a lot of good stuff going on, we have to find a way of address- ing the engagement issues and not stamping out innovation," he says. Other suppliers have expressed similar views, showing a unity not seen since the industry's opposition to Ed Miliband's pro- posed price freeze when he launched the policy idea back in 2013 (see box). Which? managing director Alex Neill agrees with Sambhi, and calls on the gov- ernment "not to meddle" in the sector until the CMA remedies have been introduced. She says further intervention could result in "unforeseen consequences" in the market. However, she also warns suppliers that they are on their "last chance" to improve their offerings to customers. CMA panellist Martin Cave would be among those welcoming the intervention, following his criticism of the CMA remedies that they "did not go far enough" and his calls for further, more drastic intervention. It appears May and Clark are of the same school of thought, seeking to go further than the CMA in a bid to "make the market work for everyone". Power politics Theresa May staked out a populist agenda at the Tory conference, and energy is once again under attack. Mathew Beech reports. "Where markets are dysfunctional, we should be prepared to intervene." Prime minister Theresa May "Knowing that £2 billion of detriment exists, we have to act on this in the next few weeks and months." Business and energy secretary Greg Clark "Don't meddle just yet. Look at the history of well-meaning but poorly judged interventions." Which? managing director Alex Neill "To introduce price controls as a solution to fix the issue of detriment would be a bad thing: it would be regressive, and it would stamp out innovation." British Gas managing director Sarwjit Sambhi Remember the price freeze… Theresa May's statement that the govern- ment will intervene in the energy market is not the first time wider price controls have been proposed. Three years ago, then-Labour Leader Ed Miliband unveiled plans to introduce a price freeze should his party win the 2015 general election, as part of a wider "resetting" of the energy market. The plan was to introduce a six-month cap on prices while the sector was reformed and the vertically integrated companies broken up. The move was slammed by rival politicians and energy companies as "simplistic", shut- ting out investment in the sector. They said it would lead to "unsustainable loss-making retail businesses". The price freeze promise was scrapped aer Labour lost the 2015 general election and Ed Miliband stood down as leader.

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