A market investigation would be conducted by the CMA to consider whether the features of a market have an adverse effect on competition and, if so, what remedies are available to address the issue.
The letter, sent to chief executive Sarah Cardell, said the criteria for a Market Investigation Reference (MIR) into the non-domestic energy market had been “undoubtedly met”.
In addition, the trade body said there were also “reasonable grounds” for suspecting competition is not effective and the scale of the problem.
UKH chief executive Kate Nicholls said: “The business energy market remains one of the biggest millstones around hospitality’s neck.
Swift investigation
“Over decades, it has been proven that it is not fit-for-purpose. It has unscrupulously excluded businesses from accessing energy, charged them extortionately when they do offer contracts and treated operators with contempt when they come to suppliers for help.
“All of the conditions have been met to justify a thorough investigation and both the CMA and Ofgem have recognised independently that the market is not working effectively.
“With the Government rightly looking at how regulators operate, a swift investigation into the non-domestic energy market would be a prime example of a good regulator acting to the benefit of the market and investment.”
In March 2023, Ofgem made a commitment to the then Chancellor to consider recommending a market investigation by the CMA if it had reasonable grounds to suspect competition in the market was not effective.
Three months later, Ofgem confirmed a lack of effective competition but there was no mention of the promised recommendation of a market investigation.
Excessive amount
Since then, firms across the sector have continued to report issues with the energy market, including being treated as high risk and therefore charged premiums or denied supply.
“There is nothing more detrimental to business investment in the UK than having to pay an excessive amount for energy and potentially not even being able to access it at all”, Nicholls added.
The letter said: “In our view, an MIR is the only way to address the entrenched competition problems in this market. The criteria for an MIR are undoubtedly met, given the reasonable grounds for suspecting that competition is not effective; the scale of the problem; and the reasonable chance that appropriate remedies will be available.”
This proposal for a MIR was developed by David Osmon of Ideal Economics, a former economist at Ofgem.
Osmon said: “The energy market is completely broken as far as many businesses are concerned. A fresh market investigation would deliver a significant boost to economic growth at virtually no cost to the Government.”
