More competition won’t fix Britain’s broken energy system

The Competition and Markets Authority has been investigating energy companies for over-charging customers, and today they finally published their conclusions.

The problem is their solutions won’t work because the scope of the investigation is too limited.

The CMA proposed two key changes:

1. They said that customers who are on pre-payment meters should have their prices frozen until 2020 – a move somewhat reminiscent of Ed Milliband’s prize freeze commitment a couple of years ago. But it’s not just people on pre-payment meters that are vulnerable to predatory energy companies, and a price freeze simply isn’t a long term solution.
2. They also said that energy companies should have access to details of their competitors’ customers so they can approach them with better deals. But the whole point is that people don’t trust energy companies – that’s why they don’t engage with the market and rarely switch providers. Why would they be open to unsolicited marketing?

Energy policy is in a bind because the political class is convinced thatcreating more competition is a panacea for all the problems the sector faces.

They’re not willing to face up to the reality that the competitive market in energy supply is a delusion – no matter how far we push it, it’s hard to see this system delivering everything we want it to. This obsessive focus on competition is a red herring.

Instead we need to be open to completely new forms of energy business models.

Nottingham and Bristol city councils have both set up their own fully-licenced energy supply companies owned by the local government.

They won’t seek profits and they’ll go out of their way to drive down fuel poverty. There may be opportunities for the companies to catalyse more investment in renewables as well.

A new campaign called Switched On London is calling for a non-profit company owned by the Greater London Authority with the objectives of eliminating fuel poverty, decarbonising generation and democratising the control of our energy supply.

The CMA is naturally going to come up with terrible answers because the box of solutions which they’re allowed to pull from, namely ones that are based on pushing competition harder and faster, don’t work.

These are sticking plasters – we need a transplant.

By neweconomics.org

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