Energy regulator Ofgem ticks off utilities

Energy watchdog Ofgem has lambasted the big six power companies for failing to pass on recent declines in wholesale prices to their customers. This failure suggests that the power market is not competitive, noted Ofgem. The letter came just weeks before the regulator is set to refer the energy sector to the new Competition and Markets Authority.

Meanwhile, National Grid announced measures to ward off blackouts in the next two winters. It plans to pay firms for curbing their electricity use on winter evenings and it will also recommission some mothballed gas-powered plants.

What the commentators said

The big six “don’t seem to be helping themselves” before the competition enquiry, said Alistair Osborne in The Times. “How much longer can they get away with ignoring the plunge” in wholesale prices before passing at least some of it on to consumers?

Some companies should be able to push through price cuts before too long, reckoned Allister Heath in City AM. But there are lots of other costs beyond wholesale prices, such as green levies and the cost of distribution, which have been going up. And there’s a further complication.

With a Labour victory meaning prices fixed at the current level, the energy firms would rather these were relatively high. That will protect them in case wholesale costs bounce back next year. So they will be reluctant to cut prices now.

“The grandstanding and prevarication” of politicians over many years has driven this industry “crazy”, said Jonathan Guthrie in the Financial Times. Endless interference and disjointed policymaking by government are a key reason the lights are in danger of going out. Taxpayers are set to pay workers to stop working just as manufacturing should be staging a recovery. “You couldn’t make it up.”

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