Anthony Hilton: Why Ofgem needs to save our energy and stay well away from the politicians

Dithering about building new power plants is just short-termism

It was interesting to see Alastair Buchanan, the man in charge of the energy regulator Ofgem, break cover this week with a warning that we are running a real risk of electricity shortages a few years out as coal- and nuclear-fired plants are retired before anything has been built to take their place.

In this context, it would have been interesting to know what he thought of a recent letter to the Financial Times from Eileen Marshall. She was widely seen as a scourge of the energy industry. She was brighter than the industry's economists, and ran rings round them.

Her thesis now is that most of the looming problems in the energy sector come from Ofgem not doing its job properly. The role of the regulator should be to hold the ring between customers, Government and the regulator so the business can run on commercial lines. A strong regulator blocks politicians who want to interfere, blocks companies that want to exploit customers, and provides a reality check for customers who would like their energy for nothing.

That is what upsets Eileen Marshall today. She feels Ofgem has become too much a creature of Government. She cites its recent decision to go along with the Government's rhetoric on the tariffs companies should offer to customers. Such dirigisme stifles competition, and is a significant step towards price controls, she believes.

All this creates uncertainty. The more Ofgem stands back and allows politicians to grandstand the more companies feel they are no longer masters of their own destiny. Decisions on building new plants fall victim to political dithering and short-termism. The uncertainty hinders investment and so security of supply is becoming an issue. In short, in Marshall's view Ofgem has become part of the problem not part of the solution.

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