Ofgem appoints economist Martin Cave as chairman

https://www.theguardian.com/business/2018/jun/25/ofgem-appoints-economist-martin-cave-as-chairman

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A champion of price caps and a critic of suppliers’ behaviour has been chosen to lead the UK’s energy regulator, Ofgem.

In an effort to toughen up the watchdog, which has been criticised for being soft on energy firms, regulatory economist Martin Cave has been selected as the regulator’s new chair just months before it is due to impose a price cap on energy bills.

A Whitehall source said: “This appointment would send a clear signal to retail energy bosses that the government wants a strong regulator to design and bring in the cap ahead of the winter and protect millions of households from unfair price rises.”

The decision to appoint Cave, who is the preferred candidate of the business secretary, Greg Clark, makes clear there will be no rowing back on plans for a cap.

Cave, who specialises in competition law, was deputy chair at the UK Competition Commission and deputy panel chair of the Competition and Markets Authority from 2012 to January this year. He was the competition watchdog’s lone voice arguing for a price cap, nearly a year before the Conservatives adopted the policy as a flagship election pledge.

Cave is unlikely to receive a warm reception from the industry, which is lobbying Ofgem to minimise the cap’s impact on profits. He has previously accused energy companies of presiding over “a market for an essential service which is presently working very badly for most British households”.

Cave also said that having many consumers paying hundreds of pounds more than others for their energy is causing severe harm. A cap should be brought in as soon as possible “to protect customers from further exploitation”, he urged last year.

The ceiling will not kill off energy companies, provided they manage their costs well, according to Cave. “The imposition of a wide price cap on default [tariffs] would promote efficiency in supply and need not endanger the survival of efficient providers,” he told MPs.

Cave said he hoped to use his new role to protect consumers during a period of upheaval for the industry, as more renewable power comes online, smart meters are installed in millions of homes and new technology is introduced.

“Seismic change is afoot in this sector and I will work to ensure that the regulator continues to protect consumers while working with government and those across the sector to build an energy system fit for the future,” he added.

Whether Cave can devise a cap that delivers Theresa May’s pledge of saving households£100 remains to be seen.

British Gas, EDF, E.ON, Npower, SSE and ScottishPower have all announced price rises in recent months, several of which were branded unjustified by ministers and cited as evidence of the need for a cap.

German firm Npower has the most expensive default tariff of the big six, at £1,230 for a household with typical electricity and gas consumption.

Legislation supporting the cap is expected to receive royal assent before parliament breaks for the summer, with the measure due to take effect before the end of the year.