Sabre rattling as speculation mounts on CMA remedies

Sabres have been rattling this week, as the energy market prepares for the Competition and Markets Authority’s (CMA’s) publication of its provisional remedies later this month. When SSE chief executive Alistair Phillips-Davies told the Financial Times the company would “have to think about” legal action if the CMA pressed ahead with its original proposal of a safeguard tariff, the message was clear: we are not without recourse, and we will not take it lying down. His comments echoed those made by the big six in the wake of Labour’s price freeze proposal, which were based on the premise that, under European competition law, they would have at least a fighting chance of protecting their right to set prices.

Fighting talk notwithstanding, it’s looking increasingly unlikely that the denouement of the CMA saga will be anything so dramatic. Analysts at Citigroup published a note to investors this week claiming the CMA was set to deliver “tough messages” to the market, but a closer read reveals a message that is more palatable to companies. Citigroup predicts that rather than press ahead with its original proposal for a safeguard tariff to prevent any customers on standard variable tariffs from paying over a set amount, the CMA will recommend a tariff for vulnerable customers. This is the acceptable face of the safeguard tariff, as the companies themselves have been saying privately since last year.

While the political and media machine requires a certain amount of sound and fury, the fact is that the market has moved on since the CMA began its investigation. Switching is up, small suppliers are flourishing, and most of the big six are making dramatic changes to their business models, prompted by market forces rather than regulatory ones. The Conservatives have seen off the Labour threat and consolidated their power base, meaning there is less political pressure for radical market interventions.

• Talking of interventions, Dieter Helm’s paper calling for water companies to take a greater role in flood defence is significant. This debate, controversial in some quarters, was always going to happen this year. Given the devastating flooding seen in the past few weeks and the apparent chaos at the Environment Agency, it just got a lot more urgent.