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Energy prices pushed up by regulation


Energy prices could actually be getting pushed up by aggressive regulation of the market, according to a letter that has been sent to the Competition and Markets Authority (CMA).

The letter which was written by a group of former energy regulators, claimed that rising energy costs and a lack of competition could be a result of over-regulation.

The group who made these claims include Stephen Littlechild (former head of electricity regulation), Sir Callum McCarthy (former head of Ofgem) and Claire Spottiswoode (former head of gas regulation).

However, this group believes that regulation has been too aggressive since 2008, and interventions on the energy market have created extra costs, leading to some suppliers closing down their cheaper tariffs.

The latest of these interventions includes a full scale investigation by the Competition and Markets Authority (CMA) into the way the energy market is run. This investigation could last until 2015, and one potential outcome could see the ‘big-six’ energy suppliers being broken up into smaller companies.

The reason for such an investigation is that there are concerns over a lack of competition, which is causing the cost of energy to increase for consumers, despite wholesale prices falling.


In reference to a range of regulatory interventions, the letter to the CMA suggested recent changes to the way the market is run are too restrictive and could actually be negatively affecting competition.

The letter claimed: "Regulatory interventions can also affect suppliers' ability to compete as well as their incentives to do so.”

Whilst the letter is partly referring to the full-scale investigation into the market, it has also questioned other interventions.

These interventions include a new rule that means energy suppliers can only offer a maximum of four tariffs, whilst it also criticised a decision to stop suppliers from offering cheap introductory rates to new customers.

Speaking about simplification to the range of different tariffs, Stephen Littlechild criticised the changes, saying that it has led to customers being “less interested” to shop around for a better deal.

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