Rapid responses
New energy model
[Re: Simpler energy tariffs will lead to higher bills and less competition, Thursday]
It is a mistake for a prime minister to interfere in markets. Competition in the retail energy market was always a bad idea. Since the buying power of the domestic consumer is relatively small, competing for custom is correspondingly inefficient. At one time door-to-door sales people would visit every potential customer. The essential component of competition, sometimes overlooked by those who work in finance, is that the quality and suitability of the product can be matched against the price. Retail energy suppliers cannot offer different qualities of electricity or gas, with the exception of the interruptable electricity supplies that may be offered to commercial customers. Competiton could still be achieved by the major suppliers selling to local area boards, which might include local councils. These retail providers would sell energy through standard local tariffs to suit the local demand. Local councils would be accountable for their performance through the ballot box, while the efficiency of private companies could be supervised by the regulator. We already accept this model in the case of water supply. And in London, we have an example of competition at one stage removed in the bus network, where there is competition to provide the services within a standard fares tariff.
David Pearson, London
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