A Northern Electric + Gas case study

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Page 2: De-regulation

Northern Electric Gas 6 Image 2In some ways, de-regulation is a misleading term. It involves altering regulations, not abandoning them. It implies opening up markets to competition. Where an industry had been a state-run monopoly, it was usually broken up into smaller units at the time of sale, and new firms were encouraged to enter the industry.

The government realised that giving up ownership did not also mean relinquishing control. It set up regulatory bodies for each industry. These bodies can influence:

  • the maximum market share any one firm might have
  • the maximum price a firm can charge
  • the performance targets that each firm in the industry must meet.

Currently, the gas and electricity industry is regulated by Ofgem (Office of Gas and Electricity Markets), whose Director General is often referred to as ‘the regulator’. Ofgem’s task is to ensure that competition within the gas and electricity industry increases and that consumers benefit from lower prices and greater choice of supplier. Ofgem has powers of investigation, and keeps a careful watch on how the industry develops. The energy industry is a huge enterprise and opening up markets to competition is a massive undertaking that has been phased in over several years. The new arrangements need time to settle.

Northern Electric Gas 6 Image 3De-regulation encourages competition. It also allows businesses to diversify. Previously, British Gas was debarred from entering the electricity industry. Under the new arrangements, British Gas supplies electricity as well as gas. Similarly, Northern Electric and Gas now supplies gas as well as electricity, as its new trading name makes clear. Nearly all suppliers have become dual fuel suppliers.

De-regulation aims to break up monopolies, to make industries more competitive, to offer consumers greater choice, to make firms more efficient through having to compete and to drive down prices. In such a business climate, there will be losers as well as winners. Northern Electric and Gas is emerging as one of the winners; it is increasing its market share.

Northern Electric + Gas | De-regulation