Beesley Lectures

Electricity market reform - failed before it's begun

The first lecture in the series got off to great start last night with Dieter Helm setting out his case for why EMR is unlikely to succeed in delivering on any of its three core objectives.  In his response Simon Less also argued that EMR was flawed, albeit for different reasons.

The reality of the situation, however, is that the government is not going to do a u-turn on EMR in the medium term, so we are in for a period of, as Dieter suggested more, sticking plasters being put on a market that is not functioning. 

There seems to be a feeling that the challenge of facilititating a huge ramp up in investment is going to be too much, but the question is, at what point does the government realise this is the expected outcome?

It feels like the acid test will be in whether, what Dieter Helm described as his 2 energy laws, are passed, i.e. customers won't be able to pay and customers won't vote to be forced to pay.  Given the recent increases in energy prices the evidence suggests that when the costs of decarbonising our power sector start to find their way to consumers, these laws will fail and then we will be into our next market review.

Ronan O'Regan

Getting the balance right – the impact of merging the OFT and Competition Commission

By merging the Office of Fair Trading (OFT) and the Competition Commission (CC) the Government hopes to speed up the administration of competition law, reduce duplication of effort, achieve more consistent decisions, and save costs.  These aims are laudable, and if achieved, should be good for businesses and consumers alike. 

But, as with any merger, the hoped for benefits are not always easy to achieve. There are also risks associated with the merger – a single competition authority may be more efficient, but we may lose the independence and robustness that a “second pair of eyes” brings. If we lose this independence, and a single competition authority is prosecutor, judge and jury, then there may be a clamour for mergers and market studies to be appealed to the Courts on their merits, which potentially this may lead to longer rather than shorter investigations.  

One of the most important benefits of an OFT/CC merger is that it would give the new competition authority access to the full range of competition powers. Currently powers are split between the OFT and CC, which can lead to competitive tensions between the two organisations. For example, the OFT may want to assure itself that there are no cartel issues that need to be addressed under its Competition Act powers before it passes a market study over to the CC for an investigation under the Enterprise Act.  But. competitive tensions over use of powers can be healthy too. For example, if the OFT is more ready to use its powers to accept commitments at phase 1, this can provide businesses with more certainty and flexibility, even although at times it may slow down the process.

Few would argue that the UK competition regime could not be made more efficient. An OFT/CC merger may be part of that solution. But, the benefits of the merger are not clear cut, and there is likely to be a trade-off between efficiency on the one hand, and flexibility and robustness of decision making on the other.  Getting this balance right is important if the proposed changes to the UK competition regime are to be a success.

Eric Morrison

Setting a carbon price floor

With the price of carbon prices falling significantly in the last few months, some have questioned whether the market is really working as it should be.  This debate is confused by differing views on what the objectives of an emissions trading scheme should be. 

For some, the EU Emissions Trading Scheme (EU ETS) should simply limit the total GHG emissions from a given group of emitters and allow them the flexibility in determining how to meet their compliance obligation.  This should be economically efficient and therefore lower the overall cost of achieving the emissions cap.  However, others suggest that, in addition to capping overall emissions, the EU ETS should send a price signal which is sufficient to stimulate significant capital investment in low carbon technology.

There is good evidence that the emissions of the installations included within the EU ETS are within the overall cap, i.e. the EU ETS is achieving the environmental objective.  The cases of non-compliance with the EU ETS are extremely rare.  However, there is less evidence that the EU ETS is promoting capital investment at the scale necessary to achieve the long term emissions reduction targets envisaged by the UK and EU.

We submitted evidence to the UK’s Energy and Climate Change Committee which recently launched an inquiry into the carbon markets.  We argue that there is a case for setting an EU-wide floor price by having a reserve price in future auctions of EU allowances.  Our evidence will be published in the lead up to the Beesley lecture.

Jonathan Grant

A new legal challenge?

The Beesley lecture on the future of legal services comes at an important time as the sector adapts to the Legal Services Act, which policy makers and commentators alike expect to change the shape of competition in the sector. 

I am looking forward to hearing Jonathan Djanogly's explain the Government's vision for the sector and the subsequent debate about the most important elements of the changes which the Act will bring.  Particular questions I hope will be considered are how the Act will impact alongside the other forces affecting the sector, for example challenging economic conditions and the disruptive effects of information technologies, and which (if any) parts of the legal services market will be attractive to new entrants and different business models.