A waste of energy? A critical assessment of the investigation of the UK energy market by the Competition and Markets Authority

Abstract

In this paper, we assess the findings of the UK energy market investigation by the Competition and Markets Authority, conducted during June 2014–June 2016. We argue that the results of the investigation have been advantageous for the large energy companies and they risk failing to bring any significant and positive change to the energy industry. We highlight three major aspects of the Competition and Markets Authority's assessment. First, the panel examined retail and wholesale segments of the energy industry in isolation, which can be misleading in the assessment of vertical integration. It also considered new entries to the sector as a sign of competitive strength when many were due to favourable government policies in the form of exemptions from various obligations. Second, its conclusion that a position of unilateral market power by the large energy companies arises from weak customer engagement (i.e. low switching rates) shifts the focus and responsibility for the problems of the energy markets away from the conduct of the companies onto customers. Finally, the investigation placed an overemphasis on competition without due reference to its consequences for consumers’ welfare.