The UK Energy Market Investigation: A Desperate Search for Evidence of a Lack of Competition?

Apr 15, 2014

CPI Europe Column edited by Anna Tzanaki (Competition Policy International) presents:

The UK Energy Market Investigation: A Desperate Search for Evidence of a Lack of Competition? by Frank Maier-Rigaud, Sean Gammons and George Anstey (NERA Economic Consulting)*

Intro by Anna Tzanaki (Competition Policy International)

Our April edition of the Europe Column is dedicated to the recent and hotly debated issue of the UK energy market investigation. With Ofgem, the sector regulator, proposing a reference to the CMA for an in-depth investigation of the market that could take up to a couple of years, stakes are high. This is not the first time that there is an inquiry into the energy sector. Political and consumer protection concerns have often challenged the industry setting. The authors explore these issues and also assess the authorities’ argumentation justifying the proposed market investigation from a competition perspective. The authors argue that the claimed lack of competition is not supported by compelling empirical evidence. Bearing in mind that regulatory intervention had also played a role in distorting competition, they stress the need for consistent and clear theories of harm put forward by the regulators. Therefore, they advocate caution when it comes to UK market investigations which may entail remedies and create uncertainty for the business community.

Introduction

The UK government progressively privatized the British gas and electricity industry bet