Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Final energy market reforms published by CMA, (Jun 27, 2016)

By Michael Menzhuber, J.D., LL.M.

Following the most comprehensive investigation into the energy market in Great Britain since privatization, the U.K. Competition and Markets Authority (CMA) has published its final energy market reforms, the agency announced on June 24.

The measures will be accomplished via a combination of CMA Orders and recommendations to the Office of Gas and Electric Markets (Ofgem) and the government. A timetable will be published shortly that sets out the remedies implementation process over the next six months.

The investigation was triggered by a reference made by Ofgem in June 2014, according to the agency’s report. As a result of the investigation, more than 30 measures will be brought in to drive down costs by increasing supplier competition and helping customers switch to better deals, and bring in technical and regulatory changes to modernize the market and ensure it works in consumers’ interests.

The investigation revealed that:

• seventy percent of the six largest energy firms’ domestic customers are on an expensive "default" standard tariff resulting in £1.4 billion more a year in payments than if the market were fully competitive; and

• the cheapest tariffs for customers on prepayment meters are currently £260 to £320 a year more expensive those available for direct debit customers.

Measures to be taken by the CMA include:

• ordering suppliers to give Ofgem details of customers, who have been on default tariffs for more than three years, which will be put on a secure database to allow rival suppliers to contact them to offer cheaper and easier-to-access deals based on actual energy usage;

• introducing a transitional price cap for customers on prepayment meters which will reduce bills by around £300 million a year;

• pressing ahead with reforming outdated systems for measuring and charging energy that distort competition between suppliers;

• reducing the costs of transmitting electricity;

• using competition to help to ensure that financial support for low carbon generation is allocated at the lowest cost to customers;

• enabling price comparison websites to play a more active role in helping customers to find the best offers and give them access to meter data to enable them to search instantly for deals; and

• giving Ofgem great influence over the detailed codes that govern the working of the market and more powers to scrutinize the performance of the market and suppliers, as well as the impact of policy.

As a result of measures directed at tackling specific issues faced by microbusiness customers (those that employ fewer than ten people), suppliers will be required to publish their prices for such customers and will no longer be able to lock them into expensive "rollover" contracts.

The reforms package will revitalize the energy market, intensify competition between energy companies to bear down on costs, ensure customers can make informed decisions about the range to them, and encourage regulations that work in consumers’ interests, the CMA concluded.

News: Antitrust