The UK Energy Market Investigation: A Desperate Search for Evidence of a Lack of Competition?

15 April 2014
Sean Gammons and George Anstey

In this article from Competition Policy International, a NERA team examines the recent and hotly debated UK energy market investigation proposed by Ofgem, the sector regulator, in cooperation with the UK Competition and Markets Authority (CMA). On 27 March 2014, Ofgem launched a consultation on referring the market to the CMA for an independent and full-scale market investigation, which would take at least 18 months and will not only bind resources at the CMA, but also cost the energy sector millions of Euros. While political and consumer protection concerns have often challenged the industry setting, the evidence of competition problems in the energy sector is in stark contrast to these developments.
The article's authors -- Director and Head of European Energy Sean Gammons, Senior Consultant George Anstey, and former Director Dr. Frank P. Maier-Rigaud -- assess the authorities' argument justifying the proposed market investigation from a competition perspective, and argue that the claimed lack of competition is not supported by compelling empirical evidence. Bearing in mind that regulatory intervention had also played a role in distorting competition, they stress the need for consistent and clear theories of harm put forward by the regulators. Therefore, the authors advocate caution when it comes to UK market investigations which may entail remedies and create uncertainty for the business community.