The Competition and Markets Authority (CMA) has proposed a set of measures that will have a significant impact on the broader energy policy landscape including a number relating to system governance. This is an important topic that has received relatively little policy consideration.
E3G believes that there are significant deficiencies in current governance arrangements that are acting to the detriment of all energy consumers. However, the remedies proposed by the CMA do not present an appropriate policy response.
The issue of market governance deserves renewed attention. However, this must be based on an holistic view of energy system policy challenges rather than a narrow focus on promoting competition.
Key concerns about the proposed remedies relating to system governance are:
- There is a need for independent and robust scrutiny of government policy but Ofgem is the wrong body to do this – particularly given a laser focus on promoting competition.
- The ‘linear model’ of ‘Government to Ofgem to codes’ that underpins the CMA thinking fails to recognise the increasing system-wide interactions or the need to manage future risks through strategic actions.
- In the same way that DECC policy decisions should be open to scrutiny, so should those of Ofgem. This is particularly relevant since there are a number of approaches to ‘promote competition’ in a market that is potentially on the verge of a structural and technological revolution.
The CMA should recognize that system governance is a vital and complicated issue that demands further and more broadly-based consideration. The specific recommendations should therefore be qualified in this way and presented as a contribution to the wider debate.
Read our full response here