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In the News

Possible Regulatory Capture? OFGEM and Keeping Secrets

The concept of regulatory capture is a type of government failure where a regulator fails to protect the interests of the consumer and instead supports behaviour by the firms it regulates. 

I read an interesting article recently that draws attention to possible regulatory capture in the energy market.

Allegedly, energy market regulator, Ofgem has been convinced by the Big Six energy firms to abandon its former procedure of publishing data about the difference in price paid to suppliers and charged to consumers for energy.

The article argues that this change of policy will keep customers “in the dark” (!) about whether the prices they are charged are reasonable or not.

Whatever the reasons for Ofgem's actions, it could be argued that this has increased the level of asymmetric information in the market - that firms have gained an advantage over consumers due to being able to withhold information from them.

However, it may not be the case that energy companies are over-charging consumers.

The last data published by Ofgem indicates that, on average, energy firms charge consumers 9% more than they have to pay their suppliers for energy. Given their costs in supplying to households - is this really an unreasonable mark-up?

Read about the Big Six win to hide their scale of profits

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