Energy Markets Competition Assessment

Philip Hollobone Excerpts

Thursday 27th March 2014 Commons Chamber

[Mr Davey]

I think that recommendations made by the Select Committee to Ofgem are matters for Ofgem. In the Energy Act 2013, we set out a new approach for my Department, working with Ofgem, and provided for the introduction of a strategy and policy statement. We have made the reforms that we believe are needed to ensure that Ofgem works well with the Government in promoting competition. I am delighted to note that, although the Labour party still seems to want to abolish Ofgem, it supports its proposal for a market investigation reference.

[Mr Philip Hollobone (Kettering) (Con)]

I am sure that residents of Kettering will welcome the inquiry into the electricity and gas markets.

I was interested to hear what the Secretary of State said about vertical integration. Surely the problem is the small number of energy suppliers that are vertically integrated. If 20 energy suppliers were vertically integrated, there might be the requisite level of competition. If a small number of energy suppliers were not vertically integrated, that might work. Surely the lethal combination for consumers is a small number of suppliers that are vertically integrated. I shall be extremely surprised if the inquiry does not conclude that that vertical integration needs to end.

[Mr Davey]

I am pleased that the competition assessment is focusing on vertical integration, because I think that it needs to be looked at. Ofgem proposed the introduction of a market making obligation because it wanted to tackle some of its concerns about vertical integration. However, the consultation document states:

“We recognise that there are benefits to vertical integration in terms of cost efficiency…and in terms of supporting investment to maintain security of supply. However there are also costs in terms of barriers to entry.”

The report is balanced, and, unlike the Labour party, has not rushed into making a judgment. Everything cannot be the fault of vertical integration. The gas market is not vertically integrated, but I believe that there are serious problems related to competition in the domestic gas supply market.