Leader: There must be a better way to regulate

If I’m going down, I’m taking you with me.” British Gas seemed to have adopted the old movie trope this week, with its unprecedented decision to refer Ofgem’s RIIO-ED1 settlement to the Competition and Markets Authority. Earlier attempts to have network costs included in the CMA’s ongoing energy market inquiry failed, but British Gas seems determined to have the same scrutiny applied to the one-fifth of the bill arising from network costs as is applied to the rest of it.

Put to one side, for a moment, British Gas’s motives in making the referral, and the eye-watering fees that lawyers on all sides will be racking up over the next six months, and perhaps the development is no bad thing. When all is said and done, and the CMA makes its reports on energy retail, RIIO-ED1 and PR14, the ground rules will be set, the doubts will be answered, and the regulators and industry alike will be able to point to an independent, authoritative voice when politicians and the press come knocking.

So, at great expense in both time and money, the air will be cleared. But what next? Must utilities and their customers continue to count the cost of these knock-about battles of regulation, or is there another way to set prices? In May, the incoming government would do well to look to Scotland, where Wics has successfully completed the first negotiated regulatory settlement. Former Ofgem director-general Stephen Littlechild is an advocate of exploring negotiated settlements in the regulatory mainstream, as is already common in the US. Looking at the CMA’s current caseload, he may just have a point.