The new UK Competition Markets Authority has published its four key areas of investigation in the energy sector. They are:
- Opaque prices and low levels of liquidity in wholesale electricity markets create barriers to entry in retail and generation, perverse incentives for generators and/or other inefficiencies in market functioning.
- Vertically integrated electricity companies harm the competitive position of non integrated firms to the detriment of customers, either by increasing the costs of non integrated energy suppliers or reducing the sales of non integrated generating companies.
- Market power in electricity generation leads to higher prices
- Energy suppliers face weak incentives to compete on price and non price factors in retail markets due in particular to inactive customers, supplier behaviour and/or regulatory interventions.
The CMA – which now has a branch office in Edinburgh – plans to hold hearings with a number of interested parties ‘in due course’.