No confidence in markets as a force for good

Post-privatisation faith in competition will be seen as “aberration”

Politicians have expressed a “collective loss of confidence in markets and competition to deliver the best outcome for consumers,” KPMG’s head of power and utilities has told Utility Week.

Simon Virley, who was formerly director for energy markets and infrastructure at the Department for Energy and Climate Change, also suggested that the enthusiasm shown for extending competition into increasing aspects of the utilities industry in recent decades will historically be seen as an anomally rather than an ongoing trend. 

Virley made his comments in the midst of the political maelstrom which has followed last night’s shock general election result.

Due to uncertainty over the make-up of the next government, Virley said he could not speculate on key policy concerns for utilities in the coming weeks and months. But he observed: “With both main parties promising major state intervention in the energy market, there seems to have been a collective loss of confidence in markets and competition to deliver the best outcome for consumers.”

He added: “In the long sweep of history, it may be that the post-privatisation period 1990-2017 is seen as the aberration rather than the norm. Greater state intervention in the energy market now seems inevitable, which will bring the UK more into line with the approach taken in other countries.”

Virley also warned that energy retailers are unlikely to be alone in receiving greater scrutiny from the state.

“The Independent Review of the Cost of Energy proposed by the Conservative Party would increase the focus on all components of the energy bill, including policy and network costs,” he said.

Eon UK’s former chief executive Tony Cocker also recently expressed concern about the state of confidence in competitive markets as a force for good in the UK.

In an interview with Utility Week he mourned the decline of “evidence-based policy” and suggested fundamental questions were being asked across the energy sector about “whether the UK still believes in competitive markets”.