Leader: Creating free markets isn’t easy – just look at the energy sector

Spring is in the air, and the first signs of life in the nascent water market are tentatively stirring. As we report this week, Thames Water has set out an ambitious plan to pinch Business Stream’s customers by undercutting the incumbent Scottish non-household retailer by up to 20 per cent. Is this a statement of intent for the English market, which opens (we’re assured) in 2017? No doubt business customers south of the border will be hoping so.

Certainly, this is what a market ought to look like. Perhaps someone could tell that to the Scottish Green Party, which seems confused about the nature of competition, having lodged a motion earlier this year attempting to block the award of the country’s £350 million public sector water contract to Anglian Water. The award of the public sector contract, for which Anglian was the hot tip, is on ice until June which is, conveniently, after the election.

Creating a competitive market out of a former monopoly sector isn’t easy – just ask energy companies. It isn’t made any easier by politicians point scoring. But it has been decided on as the course of action for the UK, and with the establishment of MOSL and the system operator now, at long last, out to tender, it is inching closer by the day. Companies such as Thames and Anglian are blazing the trail: new entrants and more cautious incumbents will be watching closely.

On the energy side of utilities, another example this week of how markets can go wrong, with yet another multi-million pound fine for poor behaviour. Fresh from reporting a record annual loss at a group level in March, Eon was hoping that its ambitious plans to split out the business would change the conversation. Instead, with the announcement last week of a £7.75 million penalty for overcharging, less than a year after a £12 million mis-selling fine, the headlines were heart-sinkingly familiar.

It’s hard to credit that Eon, which was fined for a similar billing issue in 2011, still hadn’t got its act together on the basics of selling to customers and billing them fairly and accurately by 2014. Perhaps this stands as an example of just how difficult it is to achieve transformation at every level through a major organisation, all people and processes included. For Eon, it’s a hammer blow, and one that will make the company all the more eager to embark on its radical new future.