Today the Competition and Markets Authority (CMA) published its Updated Issues Statement as part of its investigation into GB energy markets. In lay person’s terms the CMA is outlining its emerging thinking. This is an important staging post in the inquiry which still, however has a long way to run with additional working papers, hearings, provisional findings and possible remedies (if required) all expected in advance of the final report being published by the end of this year. It is in everyone’s interests that we have an energy market that not only works for customers but is also trusted and seen to do so and I am hopeful that the investigation will achieve this.
Clearly, we will need to review the documents published today and over the next few weeks in full and my view may change after a full read but it is very clear from the CMA that “the Investigation Group has not yet reached any conclusions, and its views may change in the light of further evidence and analysis”. At SSE we will work constructively with the CMA team on their current analysis. As one of the few UK-listed energy companies we know how important it is to go through shorter term regulatory uncertainty to get to the bigger goal of a GB energy market that has the full confidence of customers and investors.
As a market participant, I feel it's tough out there and things are, to say the least, dynamic. In the retail market, companies other than the so-called “big six” have been prospering and are now around 10% of the market. Customers are engaged and making choices – in fact just 11% of our customers have not changed supplier, payment method, tariff, or taken out another service from us in the last decade – though many of these may have browsed and decided to keep their existing deal with us. The roll-out of smart meters and quicker switching will help consumer choice also. Things are not standing still; they're changing at pace.
On the generation side, recent electricity market reforms have led to many new entrants (particularly in renewables) and the new capacity market, designed to secure supplies of electricity in the years ahead, will further change the energy mix. Ofgem is reporting positive signs of improved market liquidity, suggesting that buying and selling electricity in the traded part of the market is working for market participants of all shapes and sizes.
When I see the CMA at the SSE hearing in the coming weeks I will say that I believe that the market structures are generally well-functioning, but will urge them to use the next phase of the inquiry to restore trust in these structures and look at some of the negative aspects of new policies and regulations which have impacted on the market.
For example, on the policy side, I know that SSE's customers feel that the costs of green levies which are heaped on some suppliers and not others and are rising to £200 by 2020 are not wanted on energy bills. They distort the market and are regressive: their place is in taxation. I also know that the people who buy energy for customers in SSE’s energy management team don't like the annual risk of a Chancellor of the Exchequer changing the carbon price support policy at his budget or the European Union imposing financial regulations that will make trading and ultimately customer bills more expensive from 2017.
As the inquiry progresses, and commentators digest the findings, we need to think cleverly about what the issues are that actually need addressing, and then see what the right remedies are. This is a long process, a thorough process. It is one where everyone should feed in evidence to the CMA and let it run the process to its conclusion - not declare the result when it's not even half time, not second guess and not skip the necessary robustness needed behind such an inquiry.