If the Labour Party get into power in the 2015 election, they have pledged to give a new regulator all the power it needs to remove energy firms' licenses if they see fit. They have said that revoking an energy firm's license would be the result of repeated incidents of the most serious and deliberate breeches of license conditions, such as price fixing or manipulating the market. Could this be just what the market needs?
Of course, Labour are scrambling for votes in the run up to 2015, and focusing on the energy companies and the recent increase in energy bill prices is an obvious tactic, but handing this kind of power to regulators could really help swing things in favour of the consumer. Labour have claimed that their proposal will 'protect public interests' and has gained a lot of support in the wider media. Ofgem, the current regulator, have naturally stood against this as their very own role is threatened, saying that they already have the power to revoke energy firms' licenses in certain situations, and that Labours proposed plans wouldn't really make much of a difference to how things are currently run.
Caroline Flint, the shadow energy secretary, said, "Where firms fail to meet standards there must be tough and decisive action." - something which nobody will be disputing. But big thing to take from Labour's recent stand for public interests isn't their venomosity toward energy companies - there's already plenty of that in Government - it's the fact that they're seeking to abolish Ofgem and put a new regulator in place. Of course, those of us who are tired of our energy bills going up while we wait for long, 18 month investigations to yield results before figuring out how to fix the market, might well be in favour of getting a fresh set of eyes on the job.
"Where firms fail to meet standards there must be tough and decisive action."
So what power currently lies with Ofgem, and why aren't they using it? As previously mentioned, an Ofgem spokesperson it already had the power to revoke licenses in "specific circumstances, including where companies have failed to comply with particular enforcement orders." But Labour rebuted by saying that any energy firm could get away with virtually anything so long as they paid the fines issued by Ofgem, which some fear aren't nearly as hefty as they should be. Labour claim "that's the kind of regulatory gap we want to address." Currently, an energy company that's performing well and dominating the market (unfairly, some would argue) could easily find a way to 'afford' to break the rules and still make it work out their favour, despite fines. Bad publicity, as we've witnessed over the past year, doesn't do much to diminish an energy company's hold on the market.
To back up their point, Labour also drew the public's attention to information available through the freedom of information act. The figures they picked showed that 16 energy companies faced probes into mis-selling, poor customer service and malpractice. Flint claimed that these figures showed that the current Government had "Presided over a broken energy market" and that under Cameron's watch energy prices have risen twice as fast as inflation.
In response, a Conservative spokesman said the government was already taking action to address the issues raised, including forcing energy firms to simplify bills. This is something which Ed Davey has been heading up, along with a push to make switching energy suppliers easier and more hassle free - but is it enough?
"We're carrying out a full, independent inquiry to fix the broken market we inherited," he added.
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