From grand energy strategy to the nuts & bolts of the market. Ofgem has decided it smells a rat in the retail gas & power markets, and among its various conclusions & proposals it wants to redress to a modest degree the vertical integration within the electricity sector.
Well, b****r me. And who exactly was it that allowed the nicely non-integrated industry of the late 1990s to re-integrate via mega-mergers in the following decade ? This includes the final nail in the coffin, the waving-through of the purchase by EDF (biggest short position in the UK) of British Energy (biggest long position) just a couple of years ago, with the predicted and baleful consequence of a reduction in wholesale market liquidity. As Paul Golby of E.on responded:
... he was "sick and tired of being threatened every couple of years with the Competition Commission". Pointing out that Ofgem CEO Alastair Buchanan had been in post for eight years, he said if "after eight years you say the market isn't working, is that my fault or the regulator's?"
Indeed. There has been no shortage of voices arguing against allowing vertical integration every step of the way.
But do the much put-upon 'Big 6' really care ? Not while Crapper Huhne needs them so badly for his grandiose 'decarbonisation' plans: (they know that several of his 'Electricity Market Reforms' are directly inimical to enhanced market liquidity). And that's for a little while longer, I'd say: although the whole game will probably come to a juddering halt inside the next year or so when 3-figure oil prices prove stubbornly robust; neither nukes nor full-scale CCS plants get commissioned; and inflation & GDP take their rightful places centre-stage.
There's other sport to be had. Yesterday's coverage of this on Newsnight featured a little lecture on how the UK was failing to achieve the pre- conditions for competitive energy markets from non other than Herr Walter Boltz, the Austrian Energy Regulator. This would be Austria, the country that hosts the gas system conveying the largest single source of inbound gas in the EU (Russian imports via Baumgarten), and which somehow manages to squander this vast potential liquidity in the least liquid, least competitive gas market hub in Europe, the CEGH. Thank you, Walter, we'll call when we need you.