Competition between energy suppliers – already evident in switching levels – will increase and innovation in tariffs and services will be encouraged again after a period in which innovation was stifled by regulatory and other interventions.
And while the CMA report into the UK retail energy market may have a deeper impact on the systems and customer bases of the larger energy retailers, it will also make it easier for independent suppliers to grow their businesses.
These are they key points highlighted in his analysis of the CMA report by Tony Ward, Head of Power & Utilities at EY.
He said: “The CMA investigation was prompted by concerns that some consumers were not getting a fair deal, and that the larger utilities were not being transparent enough about their operations.
“Its report identifies clear actions to improve access to competitive prices for all consumers. They are also helpful in clearing the air with respect to the behaviour and transparency of the larger utilities.
“The least mobile or engaged consumers can now share more fully in the benefits that competition brings to prices, and the larger utilities can re-focus on delivering much needed new capacity without the taint that detractors and regulators had sought to apply.
“However, these proposals will also create challenges for the industry. At a time when demand for energy in the UK is dropping, suppliers are being asked to move consumers to lower tariffs – a move that will further reduce the aggregate margin made across the industry.
“This could potentially nudge up the tariffs for those who had most recently benefitted from switching to the lowest available prices.
“The focus for the industry now needs to be on turning these remedies into compliant action.
“This is not just about tinkering at the edges, energy providers will have to adjust their business models to ensure that these changes are implemented successfully and with minimal disruption for consumers.”
Commenting on the impact on energy generation, Chris Lewis, Energy Advisory Partner at EY said:
“For a while investors looking to move into the UK energy market have been on standby waiting for the clouds of uncertainty from May’s election and from the CMA impact on generation to clear.
“Now that we can see that the CMA doesn’t impact existing or new generation, it is time for less planning and more action.
“The UK needs investment in its energy infrastructure, such as nuclear, and the case for unlocking that investment has never been clearer.”
Competition Authority calls for energy market reform as confusion, complexity, lack of trust and inertia cost households an extra £160 a year on utility bills – http://goo.gl/lzqC2U