Government interventions in the energy sector have actually pushed prices up, Helm review says

Courtney Goldsmith
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Energy groups were broadly supportive of the review (Source: Getty)

An extensive review of the UK's energy sector suggests government interventions have helped pushed electricity costs higher for consumers.

The independent review, commissioned by the government, was carried out by Oxford University professor Dieter Helm.

Helm looked into each element of the electricity supply chain, including generation, transmission, distribution and supply, and concluded customers were paying more for energy than they needed to.

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"Households and businesses have not benefited as much as they should because of legacy costs, policies and regulation, and the continued exercise of market power."

The more than 200-page report said consumers were not fully benefiting from the falling costs of gas and coal, the rapidly falling costs of renewables or the network efficiency gains coming from smart technologies.

"Prices should be falling, and they should go on falling in the medium and longer terms," Helm's report said.

Helm asserted that the scale of government interventions in the electricity market was now "so great that few if any could even list them all" and that it had produced new costs and unintended consequences.

The report said:

Complexity is itself a major cause of rising costs, and tinkering with policies and regulations is unlikely to reduce costs. Indeed, each successive intervention layers on new costs and unintended consequences.

It should be a central aim of government to radically simplify the interventions, and to get government back out of many of its current detailed roles.

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Helm made a number of recommendations to help push the cost of energy down, which have set the government a challenging task, David Wadham, utilities partner at Ashurst, said.

"He has recommenced a nearly complete rethink of the way the electricity market is structured and regulated, and the way new capacity is procured. It will be no easy task for the government to balance the potential benefits of a new approach with the potential detriment of an inevitable period of regulatory uncertainty that may arise from yet another set of reforms," Wadham said.

Business and energy secretary Greg Clark said: "We are already taking significant steps to upgrade our energy infrastructure as part of the industrial strategy and have published draft legislation to cap poor value energy tariffs helping millions of consumers across Britain.

"I am grateful to Professor Helm for his forensic examination. We will now carefully consider his findings."

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