As the customers’ champion, Ofgem has spent over ten years trying to breathe life into a competitive electricity connections market in the UK; a market where developers no longer have to rely on their local utility and can choose from independent connections companies to provide their utility connections. In their latest connections market review, Ofgem appears to have finally recognised that despite their best efforts, their competitive electricity connections market is not working and that they are finally running out of regulatory ammunition. http://www.ofgem.gov.uk/Networks/Connectns/ConnIndRev/Documents1/Connections%20Industry%20Review%202007%2008.pdf It now seems likely that the economic downturn will spare Ofgem’s blushes because the competitive connections market has all but collapsed completely.
Over the years Ofgem have thrown everything at the utilities in an attempt to turn its connections’ dream into a reality. They have formally investigated some companies for alleged anti-competitive behaviour and have gone on to issue enforcement notices and fines. When this traditional form of Ofgem “punishment” failed to deliver a working market, they then went on to “encourage” the creation of voluntary performance standards and were forced into making theses mandatory. The latest “threat” in Ofgem’s words is at that “we noted that if performance did not improve, there would be an opportunity to include additional measures as part of the next price control settlement”. Is this their final push before they admit defeat and go back to the drawing board?
In a single-minded attempt to force their wishes onto the electricity utilities it appears that Ofgem has not considered that perhaps the reason the market is not working has little to do with the behaviour of the utilities and more to do with the fact that the connections market does not provide what the customer wants. There are so many problems with the way this market has been created that any advantages that might be accrued by the buyer of the services are lost almost from day one.
One of the key principles in a competitive world is that the customers want to be engaged fully and to have the opportunity to influence any decisions that are made on their behalf. They want to understand and can compare what they are getting for their money and have a form of redress should things go wrong rather than going to another provider where they will get the same kind of service.
The whole process for the customer is like buying a new kitchen where they are asked to provide a drawing of the kitchen space and where a kitchen supplier designs and costs a kitchen to suit themselves, without providing any detail of what the kitchen will look like or what the customer is paying for. Little wonder then that site installation becomes another battle ground between suppler and customer when what is to be provided, and when, has never been formally agreed.
With the activity in the competitive connections market reduced to a trickle, Ofgem should take this opportunity to change the market parameters in a way that gives the customer what they want and need. Otherwise, understandably, developers will always look towards the safety of the utilities to provide their connections and the competitive connections market will remain a very remote and distant prospect for Ofgem.