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The future is looking increasingly bleak for Ofgem. The energy regulator must be used to bad weeks by now, but it has taken another couple of punches to the gut in recent days that bode ill for its survival post-election. The initial findings of the Competition and Markets Authority (CMA) seem to point the finger at Ofgem, with the suggestion that it may have been unintentionally stifling competition. Meanwhile, the irrepressible Tim Yeo once again has the regulator firmly in his sights with his comments at the publication of the ECC select committee’s report into network costs, suggesting Ofgem dropped the ball on price controls (incidentally, the one area where, until now, it has usually won praise).
Never mind that on the retail market at least, Ofgem is fulfilling the will of its political masters. It makes a better, and more convenient, story to cast the regulator as the villain of the piece – a handy target to deflect the blame from several generations of policymakers. Bungles such as the dispute over the price tag of fast-tracking do nothing to help this image.
Labour has campaigned on the back of a pledge to scrap Ofgem. With each new blow, it seems more likely the other parties will follow suit. David Gray and Dermot Nolan have made a solid attempt to rescue the regulator, but it may be too little, too late.
Still, the team at Millbank can take at least some comfort from the fact that this death sentence is not all it seems. The UK is obliged by law, as well as by common sense, to have a regulator for its energy industry. So the so-called scrapping of Ofgem would be really nothing more than rebranding: “The regulator is dead. Long live the regulator.”
• Iain Conn knows how to make an entrance, and this week he slashed Centrica’s dividend by a third as the company gets to grips with a sickening nosedive of 35 per cent in its annual profits. Now all hinges on his new strategy, to be unveiled this summer, after the election and the CMA report. Centrica’s strategic direction will be a bellwether for the rest of the industry, and investment in UK Energy plc. The stakes are high.
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