Ofgem refers energy sector to competition watchdog

Bluebirdman_of_Alcathays

Smiley_Dan wrote: »

The marketplace is inherently non-competitive because there are too few actors. The regulators and the Government have allowed this to happen.

The only way to make it more competitive is to have more competitors either by breaking up the existing firms or capping the number of accounts each firm is allowed to have and introduce new firms.

Also, reduce the friction in changing energy company, it's still too difficult, tedious or time consuming for most.

I disagree.

We don't know if the market is competitive or not, as to this day can't see what price the energy firms are paying wholesale.

6 Major players, and lots of smaller ones isn't really that bad. I can only assume the barriers to entry are fairly low, Zog Dali and economyenergy have all sprung up recently, and can easily undercut on price due to the tax breaks they get.

Banking, Detergent and arguably Groceries have a more imperfect market in terms of barrier of entry and number of players.

Obfuscatory price collusion, perhaps. Obstructive oligopoly? Not IMHO.

ollski

Bluebirdman_of_Alcathays wrote: »

Obfuscatory price collusion, perhaps. Obstructive oligopoly? Not IMHO.

I loved that sentence, thanks.

Bluebirdman_of_Alcathays

ollski wrote: »

I loved that sentence, thanks.

Sorry, English isn't my first language!

undaunted

MillicentBystander wrote: »

Thoughts?


http://www.telegraph.co.uk/finance/newsbysector/energy/10726037/Ofgem-refers-energy-sector-to-competition-watchdog.html

It's about time. Ofgem have known the industry to be anti competitive for years & did nothing! Mounting bills & public opinion have forced this upon them & not Cameron or Millibands policies - they are both just glory hunting / electioneering on the back of us all.

Whether it will ultimately change anything for the better & even if so when is another matter I fear.

Smiley_Dan

Bluebirdman_of_Alcathays wrote: »

I disagree.

We don't know if the market is competitive or not, as to this day can't see what price the energy firms are paying wholesale.

Opening that up in the form of increased transparency would be an obvious way to improve the market.

But that's just one measure. There are different ways of measuring the effectiveness of a market. Theoretically, a properly performing market should be passing efficiency savings onto customers. That isn't happening, because the big players do not need to. By dominating the market they can undercut, just slightly, other players.

6 Major players, and lots of smaller ones isn't really that bad. I can only assume the barriers to entry are fairly low, Zog Dali and economyenergy have all sprung up recently, and can easily undercut on price due to the tax breaks they get.

.
Er... what? 6 + a handful of others without the resources to compete is terrible. There is no possible way that with just 6 major players you can get any kind of price competitiveness. Pricing is calculated relative to a small number of competitors, not on the value to the customer, which is the ideal. Therefore you get your "obfuscatory price collusion" (which is a sign of anti competitive behaviour as it is).

Energy is one of the few markets that *actually is* commoditised. A kWh of gas is a kWh of gas. With little ways of differentiating themselves, energy companies should be competing with each other on price, but instead continue to build profits. This makes no logical sense; if the market was competitive, firms would have to compete on price, thereby lowering profits.

Banking, Detergent and arguably Groceries have a more imperfect market in terms of barrier of entry and number of players.

They are far more complex than energy supply. On all of the above there are many many sub markets. Sure, you cannot build a nationwide chain of supermarkets in a day. But you can set up a corner shop specialising in high quality vegetables and do well. Everyone wins because a new service is provided.