In the latest in our series of questions to the bosses, we look at a very topical question:
“How independent will the CMA investigation into the energy market really be?”
Business Juice:
Firstly there is the prevalence of Big 6 energy company secondments into the regulator Ofgem.
Secondly there is the right enshrined in the Memorandum of Understanding between the CMA and Ofgem which devotes an entire section to the ‘Secondments of staff’ saying:
“The CMA and OFGEM are fully committed to the idea of secondments for this purpose, and will endeavour to meet each other’s requests for secondments to the extent that they are appropriate and resources permit; this may include making provision for any secondee to be available to work for part of his or her time at his or her existing employer during the course of the secondment, for example on such cases that are in progress”.
And now there are reports that Lesley Ainsworth, one of the members of the CMA panel has an estimated £50,000 worth of shares in energy companies.
Whilst these investments in Shell and a Venture Capital trust are not direct investments in the Big 6 the news has brought consternation to the process.
And these aren’t the only causes for concern, other revelations include:
- Roger Witcomb having served as a non-executive director for independent energy supplier Utilita between 2005 and 2009,
- Nenan Njegovan, an economist on the CMA staff team, having worked for Ofgem until July 2012 focussing on licence enforcement proceeding against the Big 6 supply companies.
- Duncan Mills, another economist having been employed as a regulatory manager with British Gas (Centrica) between January 2011 and January 2012.
- And another two un-named staff members having been identified as having an employment history in the energy sector
Whilst there is no suggestion that there is any partiality in the appointments, and indeed the CMA have stated that they fully expect its staff to be able to “discharge its functions in an independent and impartial manner”, the independence of the panel is being called into question.
We think this is largely unfair, indeed it would be difficult and questionable to fill the panel with those who are not conversant in the industry if a constructive conclusion was to be reached in the already tight 18 month timescale.
Where we do have a concern however is Ofgem’s potential influence from within, as an organisation ‘fighting for its life’ Ofgem has a very real interest in coming out of the investigation in a positive light. It shouldn’t. It has been at fault and complicit in many of the industry’s failings and as such should be equally ‘on trial’ as any of the other market players. It is therefore this that the CMA must ensure they are suitably distanced from to enable an objective ruling on the future of the energy regulator.
However, given the oft seen disingenuous responses from Ofgem the CMA already appear to have spent too much time with the regulator when responding to concerns for their objectivity with this gem:
“All of the inquiry group members are consumers of gas and electricity in their private capacity.”
One hopes the conclusion of their investigation has a little more thought behind it.
The Competitions and Markets Authority investigation into the energy sector
More information about the CMA investigation into the energy market with regular updates.
Ask the Boss
If you’d like a burning business energy question answered then please contact us on 0800 051 5770 or email hello@businessjuice.co.uk and you could be featured in the series.