Monday, 6 October 2008

Meddling While Rome Burns

Ofgem has laboured for many months on whether rising energy prices represent hanky-panky and today its report is before us. As part of our usual service to readers we have pre-digested the full 4 MB for you all.

On the positive side: lots of goodies for energy data buffs; several sound micro-points on small-scale anomalies that might bear fixing; opportunity taken to bash the Continentals again for not liberalising their markets; and the inevitable conclusion (*portentous drum-roll*) "no evidence of a cartel"

On the negative, and doubtless in an effort to match the
dirigisme of the times, Ofgem has come up with something it calls "unfair price differentials".

And so, in NuLab press-release-speak, it proposes to "ban unfair price differences". (Does Alistair Campbell draft this stuff for them, or must the words 'ban' and 'unfair' appear in all edicts nowadays ?) More soberly, in the main text it suggests that "
differences in charges for different payment types must be cost-reflective", and they may regulate to that effect. The have particularly in mind to help "more than 4 million customers without gas who currently have no access to the most competitive tariffs" (viz, the discounts available for buyers taking both gas and electricity from the same supplier)

To make the obvious points:

- in an industry where all players use the same infrastructure for the same regulated fees, nothing is more likely to result in all suppliers charging
the same, than forcing them to be fully cost-reflective with no 'unfair' differences

- a discount for buying both gas and electricity would
prima facie seem to be an entirely cost-reflective proposition anyway

- free markets have a way of sorting out irrational price-differentials (provided they don't constitute predatory cross-subsidy etc, which is illegal anyway)

In this day and age we should presumably give thanks that they don't propose to re-nationalise the lot. Not much pleasure, however, to be taken from the trend towards micro-meddling. Back to your knitting, Mr Ofgem: check out the EDF takeover of BE for us properly - and do something to keep the lights from going out !



Steven_L said...

I saw the OFGEM chap peddling his nonsense on BBC this morning.

He was trying to pass the blame for consumers not switching away from their monopoly suppliers onto energy firms.

As someone who has worked selling gas and electricity I can safely say the fact of the matter is that these consumers simply do not want to change suppliers.

It doesn't matter how many times you phone them up, or knock on their door, they just say no.

What utter twaddle that man was talking when he insinuated that the energy firms are not trying hard enough to switch consumers to 'duel fuel'.

Old BE said...

The energy companies give a huge discount to people who are prepared to read their own meters and pay in advance (direct debit) - and I assume they don't do this out of the goodness of their French and German hearts. Perhaps online dual fuel discounts are cost reflective after all...

As Stephen L says, what is required is more shopping around not less.

After the torrid time I had with npower, eon seems brilliant!

BenefitScroungingScum said...

I'm a bit confused (actually that's nothing new!) but, I had thought the major impact of this was supposed to be reducing the extra costs that people using pre payment meters have to pay? Bendy Girl

Nick Drew said...

steven - to be honest I think all regulators are heavily under the NuLab cosh right now

BE - another free market success story ! and yes, I'd be surprised (and maybe Ofgem would be as well ...) if suppliers couldn't give a commercial justification

Ms Bendy - that's certainly one category they're looking out for, & they've identified a few more (e.g. folk who don't have a gas supply at all)

Anonymous said...

I have launched an appeal for our Brave City Boys - Britains Battling Bankers!! Its on me blog - will I get your support?

Bill Quango MP said...

O/T but Huw Edwards just did the news at ten in the style of the PM

"The current financial crisis, which started in America, and spread to Britain...."
I wonder who wrote that for him?

thank god the overworked Peston was on, or the largest one day points fall would have been Thatcher's fault

Nick Drew said...

Bill - the Grauniad's Monday supplement ('Media') today was a special on 'How to save the BBC' (lead article by ... yup, your first guess, Polly Toynbee)

Mutt - several folk seem to have suggestions for some of those Brave Boys ...

Steven_L said...

Nick, between you me and the blogosphere, local regulators have zero confidence in national ones.

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