CMA scrutiny of Ofgem’s role in market would be ‘positive’, says Nolan

Ofgem chief executive Dermot Nolan welcomed industry calls for the Competition and Markets Authority (CMA) to include the regulator itself in its energy sector probe.

Ofgem referred the energy market to the CMA over the summer due to concerns that competition is “not working the way that it should”, Nolan said, but since then many industry players have accused Ofgem’s rules of playing a part in reducing competition.

Nolan acknowledged the concern at Energy UK’s annual conference on Wednesday afternoon, saying that there is a view that competition issues “may have been worsened” by regulatory intervention.

Nolan said he would be “happy” and “quite positive” for the regulator’s rules to face CMA scrutiny.
“I want that studied too,” he said.

Ofgem’s decision to limit the number of retail energy tariffs that suppliers can offer is often cited as an example of regulation that attempts to protect the consumer but has the unintended consequence of reducing competition and innovation, particularly for smaller new entrants.

Nolan said that although there is a “strong logic” behind the tariffs restriction he does not view it as a long-term solution, but one which needs to be in place long enough to rebuild trust.

More broadly Nolan said he would prefer if the regulator moved away from prescriptive rules surrounding supplier license conditions for a more principle based approach.

His comments echoed those he made last week at the annual Utility Week congress where he said: “I want to see a smaller license in the future, with the underlying principle of treating customers fairly. That’s the ground we want to go to over the next couple of years.”

“But we have to see improvements,” he said on Wednesday, adding that if improvements are made the market will get to the point where there is innovation and there is competition but “where the duty is on senior people to take accountability for their actions.”