Examination of Witnesses (Questions 340-348)
MR HUGH
CONWAY, MR
JEREMY NICHOLSON
AND MR
CHRIS TANE
3 JUNE 2008
Q340 Miss Kirkbride: Do you think
it should be the regulator or the Competition Commission?
Mr Conway: Not the regulator.
Q341 Miss Kirkbride: He has already
failed.
Mr Conway: Definitely not the
regulator; the regulator has already prejudged this by saying
he does not want to investigate the industrial market. He is currently
investigating the domestic market, and in fact he keeps on saying
the market is working but he does not look at our side of it at
all. Maybe he should or maybe he should not, that is another issue,
but I think whoever investigates it has got to be fully independent.
Mr Tane: I would say both for
my business and for the CIA, our view is not that there is anti-competitive
behaviour per se going on; our view is the way that the market
is structured is the heart of the problem, so to that extent a
competition inquiry of course would throw up some interesting
things, it would certainly focus attention on a core issue for
us, but in the end I think we believe it is the structure of the
market that needs to change not some competition laws that need
to change.
Q342 Miss Kirkbride: When you say
the structure of the market, is that about dismantling some of
the vertical and horizontal integration that has taken place?
If it is that, how else do you do it?
Mr Tane: For example the structure
of the market issue that we have talked about already in terms
of the absence of independent players is well worthy of investigation
as to exactly why that is. We believe that changes could be made
which would encourage new entrants rather than discourage them,
and that in itself would be very helpful.
Q343 Miss Kirkbride: Who would make
those changes to ensure that happens, not to just allow it to
happen, because at the moment it happens if someone just snaffles
them up presumably so that they cannot—
Mr Tane: I think that is a more
technical question than I can answer. My colleagues here can talk
about which body should be bringing those changes in.
Mr Nicholson: We have an independent
regulator but nonetheless its judgments are affected by things
that happen outside. We have seen this with the announcement of
its investigation into the domestic and small business sector
earlier on, and doubtless Ofgem will take into consideration not
just what this Committee says but what might be coming to them
from BERR and other government departments in terms of concern
about the operation of the market and security of supply. Going
back to the area we mentioned earlier on—access arrangements,
transaction costs, these sorts of things—are within the
regulator's power where it would not necessarily depend on a Competition
Commission referral but those are areas where they could take
more action and therefore facilitate more competition.
Mr Conway: They have to acknowledge
and I do not think they have as yet acknowledged that there is
an issue within our markets.
Q344 Chairman: I was very surprised
indeed that Ofgem did not look at the wholesale markets as part
of their announcement. I do not know what the rationale for that
was. This is very frustrating, we are out of time but can I just
clarify one thing, in your answer, Mr Tane, on gas storage, did
you say the UK now has 19 days' storage or is moving towards that?
Mr Tane: It will have 19 when
the storage that is currently being invested in comes on-stream.
Q345 Mr Oaten: What is the current
number?
Mr Conway: I think it is 13.
Q346 Chairman: Thank you for that.
Your real plea is not so much necessarily for breaking up the
consolidation of the industry but transparency, it is more the
openness of the market that you need to make sure that the market
works properly? I am just checking.
Mr Nicholson: That is a big component
of it and without the transparent market you are not going to
have an efficient one either. That applies both at a European
and a UK level.
Mr Binley: With respect, can I just say
this, it is all right you being able to see the figures but you
want to be able to act within that market and that is what you
cannot do at the moment.
Q347 Chairman: But in order for the
market to function effectively the market needs to be fed with
information that they are not getting at present, are they?
Mr Nicholson: Not enough.
Q348 Chairman: Thank you very much.
There is lots we could ask you. We are very grateful for your
excellent written and oral evidence, gentlemen, thank you very
much. If any of you feel that you have not had a chance to say
something the opportunity exists to give us further written submissions.
Mr Nicholson: We may well do,
especially on prices which have moved a little since our initial
submission.
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