No energy rip-off. No windfall tax. Glad that's clear!
Business Secretary John Hutton has told the Daily Telegraph today that energy companies are not ripping off customers:
"Making a profit is better than making a loss and if we want these companies to invest significant resources investors are not going to do that if they don't think there's a reasonable return to be made on their investment," he says.
That was the default view of regulator Ofgem until, in March this year, it launched a wide-ranging probe into allegations of market failure and anti-competitive practice in the energy supply industry. It said then:
"Recent events in the market have increased public concern and have damaged customers' confidence that competition is working well and giving them a good deal. Customer confidence is vital for a well-functioning market. ...The detailed probe we are now launching will investigate whether the market is working well for all energy customers - and not just particular groups such as those who are on the cheapest online deals."
The detailed probe is still under way. But a major contribution to it was made by the cross-party Commons Select Committee. They repored last month:
"Written and oral evidence has highlighted serious problems in the functioning of a number of aspects of the markets for gas and electricity."
And they flayed Ofgem:
"We are particularly concerned by the perception that Ofgem has already predicted the outcome of its inquiry, by stating at the outset that it has seen "no clear evidence that the market is failing". We hope this perception is proven wrong, and intend to scrutinise the regulator's findings thoroughly."
Reassuring then to hear from the man in charge of the whole system, and who will exercise ministerial final say over any decision to refer the industry to the Competition Commission, that everything is working OK and there are "no rip-offs".
However I will just pick three points out of the Select Committee report:
1) Alarmingly contradictory evidence over the extent of the "invisible market" in gas contracts making it "difficult to reach secure public policy conclusions".
2) Need for an urgent investigation into why gas companies won't use the forward market for gas contracts, and absent any transparency a referral of the matter to the Competition Commission.
3) "We note that no witness has suggested that there is any evidence of active collusion in the wholesale or retail markets. It is clear, though, that in a retail market dominated by six big players, it is easy for those players to make informed judgements about the behaviour of their competitors. This can distort competition, without any active collusion occurring." Distortion of competition is, in my book, the same as a rip off only it sounds nicer.
Mr Hutton's remarks today are a blunt rejection of both its findings and its approach - though the Select Committee itself is not mentioned in the interview. They also seem to pre-empt the Ofgem probe.
For good measure Mr Hutton has done all economics journalists a favour over the Windfall Tax issue. Now I will no longer waste my time ringing the Treasury to ask whether it is still on the agenda (it was, as of 4pm yesterday) since he, as the Telegraph informs us, "effectively rules out imposing a windfall tax on energy firms".