Outlook: Squabble between two monopolies

Ooh, er, John Battle, the energy minister must be thinking. His two industry regulators, Offer and Ofgas, have insisted that regional electricity companies (Recs) cease trying to poach customers from British Gas until their own markets are open to competition. The Recs are refusing, on the grounds that this gives Centrica (British Gas) an unfair competitive advantage in being able to market both gas and electricity to domestic customers while electricity companies are restricted in selling gas. Both sides are looking to the unfortunate Mr Battle to adjudicate, something he appears uncommonly reluctant to do.

Sort it out yourselves, seems to be his attitude, which when you think about it, may not be such a bad response. This, in essence, is a squabble between two monopolies, the only difference between them being that Centrica has a monopoly of the whole country while each Rec has a monopoly of only a bit of it. The problem is caused because of the electricity industry's admission that it will not be ready to introduce competition until June next year, more than a year later than scheduled.

The effect of this is that while electricity companies can already offer their customers cut priced gas, Centrica is unable to do the same with electricity. Grossly unfair, says Centrica; the Recs are doing all they can to hang onto their own monopoly while exploiting the fact that we have already abandoned ours. Advantage, Centrica. Yes, say the Recs, but Centrica is already signing up customers to the promise of 15 per cent discounted electricity on condition they don't switch gas supplier; now we are being denied the opportunity to do the same. Deuce.

That's your look out, retorts Centrica; if you hadn't dragged your feet over competition, we wouldn't have this problem. Advantage Centrica. Come on, we're only little companies, say the Recs; Centrica is much bigger, the only energy supplier with a national customer base and reach, which gives it a natural market advantage it will exploit. Deuce. Nonsense, Centrica replies; we make so little money we can't even pay a dividend while the Recs have combined profits of pounds 2bn a year. Just who's exploiting the customer? Advantage Centrica. The Recs then accuse Centrica of being overstaffed, inefficient and incompetent, at which point both players are ordered off the court for abusive behaviour.

There are actually some obvious solutions to this fracas. Mr Battle should plainly have fined the Recs more heavily than he did for failure to introduce competition on time; pounds 50m goes nowhere near compensating customers for being deprived of the benefits of competition for a year. It may be too late for that now but a reasonably level playing field between the protagonists might be achieved by allowing both sides to sign up customers but banning supply and sale until a fully competitive electricity market has been achieved. Alternatively, both could be banned from pre-marketing altogether. If Mr Battle does feel minded to enter the fray, this should be his preferred adjudication.

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