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IoD welcomes CMA’s energy market proposals

11 Mar 2016

The Institute of Directors has welcomed the Competition and Markets Authority’s provisional findings of its investigation into the retail energy market.

Dan Lewis, Senior Energy Adviser at the IoD, said “it is welcome that the CMA has once again shown its commitment to expanding competition across the economy. Falls in the wholesale price of energy have not necessarily translated into lower bills for consumers and businesses and it is right that questions were asked.”

On lifting the number of tariffs energy providers can offer:

“Lifting of the limit on the number of tariffs energy companies can offer is the right thing to do, as the benefits of competition – lower prices and better service – can only be realised with increased consumer choice.”

On a new database of long-term customers on standard variable tariffs:

“You can’t have loyal and disengaged customers on standard variable tariffs endlessly subsidising the acquisition of new customers because their own prices are not being reduced in line with the market. Identifying and creating a database of who these customers to encourage them to switch and save money could be a positive remedy.”

On locational charging for transmission losses:

“With large amounts of intermittent power, such as wind and solar, continuing to come on-stream, there has been a huge rise in the network costs for balancing, back-up and grid reinforcement. By their nature, many wind and solar farms are often built far away from homes and businesses, which results in them being cross-subsidised by other power stations.

“On top of being paid a premium price for renewable energy and allocation at the top of the merit order, this is one subsidy too many. The CMA is right to suggest that the extra costs of transmitting energy from faraway places should not be picked up by everybody else in the industry.

On the transparency of allocation of Contracts for Difference:

“We share the CMA’s desire to see more transparent competition in the Contracts for Difference scheme. As part of this process, we believe more emphasis should be given to the value of the power produced as well as the price of that energy. A randomly generated unit of power from a solar farm, for instance, will never be as valuable as a predictable one, when you want it from a gas turbine or nuclear power station. Moreover, future impact assessments should assess the costs of a single project across the entire network, rather than just as a standalone investment for the life of the contract.”

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