Britain’s water and energy watchdogs should be empowered to crack down on companies that ‘rip off’ consumers and ‘damage the economy’, a key government adviser has said.
John Penrose, Britain’s ‘competition czar’ who advises the government on regulator reform, said a new competition bill would tackle modern monopolies such as Google, but has yet to address regulation of water and energy utilities.
“Our system of economic regulation is not working properly,” Penrose told the Financial Times, referring to Ofwatwhich oversees water and sewerage companies in England and Wales, and Ofgem, the energy regulator.
“It has been too soft, giving monopolistic firms too easy a ride on price and quality, with suppliers and customers paying the price for this failure.”
Penrose’s comments follow FT research which showed the 10 biggest water monopolies privatized paid £1.4 billion of dividends in the year ending March 31, 2022 despite concerns about the dumping of unknown amounts of untreated wastewater and stormwater in beaches, rivers and lakes.
“Water is the essence of life and none of us can live without it, but the performance of our long-term regulatory model looks poor,” Penrose said. “Regulated utilities should deliver good quality standards while receiving steady but unspectacular performance in the process.
“Instead, we see shareholders gaining monopoly profits which are both very high and extremely stable, meaning customers get ripped off by paying too much. He added: “It hurts the economy.”
Penrose, chairman of the Conservative Policy Forum, a grassroots-led think tank, was appointed in 2020 by Chancellor and current Prime Minister Rishi Sunak to review UK laws designed to promote competition.
The Digital Markets, Competition and Consumers Bill has its second reading in the House of Commons on Wednesday and aims to give more powers to the watchdog, the Competition and Markets Authority.
Penrose acknowledged that there were calls from across the political spectrum to renationalise the water and energy sectors. A YouGov poll last year, 58% of Conservative voters thought water should be placed under public control and 47% for energy.
However, Penrose said, “More competition is the quickest way to reduce costs that are ultimately passed on to customer bills.”
THE business water market was opened up to competition by government and water regulator Ofwat in 2017 in a bid to emulate the energy sector, which had liberalized services in the 1990s.
Independent retailers were allowed to handle customer complaints, bills, meter readings and inquiries anywhere in the country, although water was still supplied by the regional water company. But a huge increase in complaints on service have cast doubt on the success of the market.
The opposition Labor Party has called for a new regulator merging parts of Ofwat, the Environment Agency and the Drinking Water Inspectorate, but Penrose said: ‘Moving the deck chairs will not does not solve the underlying problem”.
Cat Hobbs, director of We Own It, which campaigns for public ownership of water, rail and energy, said: “Attempts by regulators to mimic the market have clearly failed and water should be returned to the hands of the state, as is the norm in the world”.
Ofwat and Ofgem have been approached for comment
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