Extreme competition, but not extreme enough

Lawrence Solomon
National Post
February 7, 2008

Since Maggie Thatcher broke up the United Kingdom’s dysfunctional energy monopolies two decades ago, costs plummeted, as did prices for consumers, as a wave of new entrants into the energy business led to a textbook example of the benefits of competition. Today, the typical household has several thousand options in purchasing power that come to it courtesy of six dozen different licensed merchants. Compare that to the choices your local power monopolist provides you.

Then ponder this: The ingrates across the Pond aren’t satisfied with the level of competition that the UK system provides them. When prices drop, as they have on numerous occasions in the largely deregulated UK energy marketplace, consumers are happy. When they rise, as they have recently, consumers cry foul. They do this even though a recent investigation of alleged price-fixing by Ofgem, the industry’s independent regulator, found no evidence of collusion, and even though a commonly recognized contributor to rate hikes are measures taken to combat climate change.

Because of continuing public pressure, a UK House of Commons Select Committee hearing on competition in the energy market will now investigate whether there is enough competition among the big energy suppliers. The committee is unlikely to discover anything to discredit Ofgem’s finding – Ofgem is the gold standard among utility regulators. The most the committee could do, if it finds cause for alarm, is refer the matter to the Competition Commission.

Conspiracy theorists are gladdened by the prospect of hauling industry executives to this parliamentary court. Reasonable people should be saddened to see the world’s most competitive energy marketplace subjected to baseless accusations. Most of all, they should be alarmed to see the independent regulator’s authority undermined, for without a de-politicized and independent regulator to set ground rules fair to all, the energy marketplace would again become dysfunctional.

More on the Select Committee hearing.

Lawrence Solomon is executive director of Toronto-based Energy Probe.

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