Cave would challenge political interference in Ofgem

The man expected to become the new chair of Ofgem has said he would fight any moves by ministers to interfere with its work.

This morning, the House of Commons Business, Energy and Industrial Strategy (BEIS) select committee held a hearing to confirm the appointment of Professor Martin Cave to head the energy regulator.

The academic told the committee: “If I thought that what I was being asked to do was contrary to duties and that it was an unnecessary infringement on Ofgem’s independence, I would resist with all my might and main.

“You have to strike out an independent path and have the courage of your convictions.”

And he has expressed scepticism that vulnerable customers will be able to find good deals in the energy market by the time the government’s mooted price cap runs out.

“They (customers) aren’t being very well served because prices are too high. The problem particularly arises in the retail sector where the big six companies exercise too much power.”

Cave also expressed doubt that low income customers will be able to access competitive deals in five years’ time when the price cap is due to expire under legislation currently going through Parliament.

He said: “I struggle to convince myself that vulnerable customers in particular will be able to find a satisfactory, non-exploitative energy price within the market place at the end of that period.”

Cave called for a two-year cap on suppliers’ standard variable tariffs in a minority report submitted alongside the 2016 Competition and Markets Authority (CMA) investigation into energy prices.

He also told the committee that he did not favour creating new DNOs to compete with the existing network providers, but expected to see consumers ‘bypassing’ these local monopolies by generating their own electricity using renewable technologies.

Cave also pointed to a review he had chaired of electricity transmission and distribution in Northern Ireland, which he said had cut the rate of return on equity that their owners could receive and had become a template for network regulation elsewhere in the UK.

He said Ofgem will have sufficient powers to tackle consumer detriment for households once the price cap legislation is in place. But added he is ‘still worried’ about small businesses, which the CMA probe showed were paying a higher margin on their energy costs than domestic customers.

He said that one remedy for SMEs might be to make consumer data available to agencies, which could then secure the best deal for often ‘overworked’ business owners.

Quizzed on the impact of Brexit, he said it may have an impact on the amount of investment in interconnectors but that the energy industry would not be as affected as other industries, such as aviation.