Littlechild: Ofgem has no power to enforce price cap

Former regulator says government cannot pass the buck for its manifesto commitment to Ofgem

Former energy regulator Stephen Littlechild has slammed energy secretary Greg Clark’s assertion that Ofgem has the power to fix market failings by imposing price regulation on suppliers.

On Tuesday, in response to opposition questions about his commitment to deliver the “safeguard tariff” pledged in the Conservative party manifesto, Clark insisted he stands by the promise.

He added that that consumer detriment in the energy market should be “put to an end as soon as possible, rather than waiting for legislation to pass through the House.

“Ofgem has those powers and I believe it should use them,” he said.

Responding to the statement, Littlechild said the energy secretary is wrong.

“Ofgem can propose a tariff cap, but a supplier may decline to accept,” he explained.

“In that case Ofgem can ask the CMA [Compeition and Markets Authority] to give it the power to impose a cap. However, the CMA has already given its view. It has considered and explicitly rejected a tariff cap.”

Littlechild concluded: “There are things that Ofgem could do, or undo, to address present concerns. But it is questionable whether imposing a tariff cap is one of them.”

Littlechild – who was director general for electricity supply from 1989-1998 – has become an outspoken opponent of government intervention in the energy market, and particularly of proposals for energy retail price caps.

When Greg Clark wrote to Ofgem’s chief executive Dermot Nolan after the Queen’s Speech, instructing him to tell government what the regulator intended to do to fix market failings, Littlechild followed up with a letter of his own.

Alongside other former regulators, Littlechild urged Nolan to take the opportunity to disprove the viability of price regulation as a remedy to market failings.

In the past, Littlechild has also expressed deep misgivings about the CMA’s analysis of consumer detriment in the energy market. In January, he published a fresh assault on the CMA’s assertion that consumers are paying £1.4bn a year more for the energy than they should.

He branded the finding “implausible” and said the CMA’s approaches to calculating customer detriment were “inconsistent with its own guidelines”. One of its calculation models was also deemed to lack transparency and to be based on “hypothetical” and idealised market modelling.