Regulation can't fix the energy industry

Let's stop pretending it can.

Last week's changes to the energy billing regulations, represent the biggest regulatory change experienced by the industry since privatisation. In fact, they are some of the biggest changes to any regulation, in any industry, and are all the more ground-breaking for directly affecting the way that energy companies sell their products to the consumer. At first glance , this was a simple case of victory for consumers over the corporate world, but the situation is more complex. After all, there's something inherently wrong with the idea of a predominantly consumer "victory" - the right balance of market forces and regulation ought to result in a capitalism that works equally in the interests of producer and consumer. If that is not the case, then it's a clear indicator that something has gone wrong, and that the balance needs to be restored.

These new regulations will go some way towards achieving  that, but they certainly shouldn't be seen as a happy outcome. The costs of any regulation are commonly passed to the consumer, and these changes will be no exception. No regulation is ever set in stone, however, and business leaders in the utilities industry should not give up trying to make theirs the sort of industry that requires less regulation, and not more. Leaders in other regulated industries should also take note. There will be much to learn from how the industry deal with its new regulatory environment, but there is also much to learn from the circumstances that led to such drastic action.

Therefore, it makes sense to examine why the regulator felt compelled to act in such drastic fashion. Regulation may seem to be the lesser of two evils, but the point is that the industry's relationship with its customers should never have deteriorated to the point where that was the case. For business leaders in the utilities industry, the lesser evil really ought to be an investment in building a productive relationship - fuelled by more in-depth insights - with their customers. Indeed, businesses in any regulated industry ought to take this attitude. A more proactive approach to soliciting customer opinion means that management are aware of the strength of customer demand say, for simpler pricing.  The investment required to do so, and the potential losses incurred, will almost always be offset in the long term; if industry practices can produce satisfied customers, then they will have a satisfied regulator as well.

At first glance, it may appear that energy companies have simply played by the letter of the law, but it's really more a case of them forgetting that their fight is with each other, and not with the regulator. There's a lack of competition,  but that's not to say that there are too few energy companies for market forces to be effective - the UK telecoms industry is one of the best in the world, and has fewer major players than the energy market. Rather, energy industry leaders have come to focus on the regulator, and not their competitors. Accordingly, regulators should see promoting competition as a priority, and a huge part of that comes from seeing the voice of the customer as a business resource, not just a matter for the customer complaints department. In a sector with an ethic of genuine competition,  those companies that do not heed the wishes of their customers do not last long. For example, the OFT rarely chastises retailers for unreasonable pricing - consumers do a very good job of that themselves.

I have written previously for this magazine of how we as a public have a vital part to play in building better businesses, and the energy industry is no exception. While it may form a relatively mundane part of our consumer experience, it is nonetheless a costly one, and we shouldn't allow ourselves to be distracted from making our voices heard. Energy companies for their part ought to make a  greater effort to listen, and to act upon what they hear; not only might they find advantages for their business, but the regulators would no longer have to interfere so strongly in the industry. It is right that  the state should step in when business practices within an industry leave consumers with few good options. However, it is the proper function of businesses to provide consumers with as many good options as possible, and that is the case in regulated industries as much as it is in those elsewhere in the economy. If customers are not forthcoming with their opinions then business leaders should do more to obtain their input - surely companies would rather meet the demands of their customers, rather than leaving it to the regulator to do so?

Photograph: Getty Images

Claire Richardson is VP at Verint

Photo: Getty Images
Show Hide image

Stella Creasy targeted for deselection

Organisers on the left believe the Walthamstow MP is the ideal target for political, personal and geographical reasons.

Stella Creasy, the high-profile MP for Walthamstow and defeated deputy Labour leadership candidate, is the first serious target of an attempt to deselect a sitting Labour MP, the New Statesman has learnt.

Creasy, who is on the right of the party, is believed to be particularly vulnerable to an attempt to replace her with an MP closer to the Labour party’s left. Her constituency, and the surrounding borough of Waltham Forest, as well as the neighbouring borough of Leyton and Wanstead, has a large number both of new members, inspired either to join or return to Labour by Jeremy Corbyn, plus a strong existing network of leftwing groupings and minor parties.

An anti-bombing demonstration outside of Creasy’s constituency offices in Walthamstow – the MP is one of around 80 members of Parliament who have yet to decide how to vote on today’s motion on airstrikes in Syria – is the latest in a series of clashes between supporters of Creasy and a series of organized leftwing campaigns.

Allies of Creasy were perturbed when Momentum, the grassroots body that represents the continuation of Corbyn’s leadership campaign, held a rally in her constituency the night of the Autumn Statement, without inviting the MP. They point out that Momentum is supposedly an outward-facing campaign supporting Jeremy Corbyn and the Labour party towards the 2020 general election and the forthcoming local and European elections. Labour holds 27 out of 27 council seats in Creasy’s constituency, while Creasy herself has a majority of 23,195 votes.

“If you look at the seat, there is nothing to win here,” said one Labour member, who believes that Momentum and other groups are planning to depose Creasy. Momentum has denied any plot to remove Creasy as the MP.

However, Creasy has come under pressure from within her local party in recent weeks over the coming vote on bombing Syria. Asim Mahmood, a Labour councilor in Creasy’s constituency, has called for any MP who votes for bombing to face a trigger ballot and reselection. Creasy hit back at Mahmood on Facebook, saying that while she remained uncertain of how to vote: “the one thing I will not do is be bullied by a sitting Walthamstow Labour councilor with the threat of deselection if I don’t do what he wants”.

Local members believe that Mahmood may be acting as the stalking horse for his sister, the current mayor of Waltham Forest, Saima Mahmud, who may be a candidate in the event of a trigger ballot against Creasy. Another possible candidate in a selection battle is Steven Saxby, a local vicar. Unite, the recognized trade union of the Anglican Communion, is a power player in internal Labour politics.

Although Creasy has kept her own counsel about the direction of the party under Corbyn, she is believed to be more vulnerable to deselection than some of the leader’s vocal critics, as her personal style has led to her being isolated in her constituency party. Creasy is believed to be no longer on speaking terms with Chris Robbins, the leader of the council, also from the right of the party.

Others fear that the moves are an attempt by Creasy’s local opponents to prepare the ground for a challenge to Creasy should the seat be redrawn following boundary changes. The mood in the local party is increasingly febrile.  The chair of the parliamentary Labour party, John Cryer, whose Leyton and Wanstead seat is next to Creasy’s constituency, is said to fear that a fundraiser featuring the shadow foreign secretary, Hilary Benn, will take an acrimonious turn. Cryer was one of just four shadow cabinet ministers to speak against airstrikes in Syria.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.