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As far as mood music goes, the UK’s biggest energy companies were probably hoping the soundtrack for the next two years would be a little more upbeat than what the upcoming CMA investigation is offering.
Centrica was first in line to warn that the extensive investigation would put the brakes on investment at a time when the UK needs it most; going as far as to say that by the time the probe concludes, the UK could be plunged into darkness.
But perhaps Centrica’s increasingly hysterical rhetoric says more about the threat the investigation poses to Centrica rather than to the wider industry.
In recent weeks a flurry of reports has listed the top brass expected to flee the company before the CMA even gives its verdict (lead story, p4). It’s little wonder that analysts conclude that the good ship Centrica is “rudderless” and sailing through “increasingly choppy waters”.
Centrica is not alone, of course. As energy company responses to Ofgem’s consultation on the CMA referral have come to light, so too have the battle-lines, which each has drawn in terms of both defence and attack (p16).
Central to the debate is the call to end energy self-supply by separating those business units focused on generation with those tasked with supplying retail customers. Unsurprisingly, views on whether vertical integration is a help or hindrance depend on whether the company offering that view is or isn’t.
And the debate is nothing new.
In terms of boosting wholesale market liquidity, traders have consistently called on Ofgem to limit energy self-supply because this would increase the amount of trading the big six would need to do in the open market.
The generation side of the business would need to sell. The supply side of the business would need to buy. And potential new market entrants would have an easier time finding opportunity to take part too.
It’s strange, then, that Ofgem ignored these calls, to offer a different solution (p12); one with a price tag bigger than the impact it is expected to have, and which might well prove redundant once the CMA has had its way.
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