New era of competition ... same old problems

Business Opinion/Cliff Taylor: The date: 2007. The scene: The Office of the Minister for Enterprise, Productivity and Competitiveness.

The occasion: The Minister meets the Competition Commissioner - a supremo appointed in 2006, following the recommendations of the fourth enterprise strategy review group, to drive competition across the economy

Minister: How is it all going, then?

Commissioner: Swimmingly, I think. We've slowed the rise in electricity prices to 10 per cent per annum and I think we may have a new entrant into the public health insurance market, once all that litigation about the risk equalisation scheme is finally tied up.

The European Court has promised a decision by 2009. We are close to agreement with the CIÉ workers on the introduction of competition in the Dublin bus market - they're happy to let someone else have a go on the late night routes, apparently. And the lawyers are promising to open up entry to the profession, though they have said it must be done on a "appropriate and phased basis".

Minister: Now commissioner, are you sure they didn't have their fingers crossed behind their backs?

Commissioner: No. But they did say something about an accreditation process for other training providers for the profession. I think it could be lengthy enough. And they are warning that funding alternative educationalists for the sectors might require a "modest" increase in fees. Horse-hair costs are also rising apace, apparently.

To be honest, now that there are only six tribunals of inquiry left, I think they are feeling the pinch.

Minister: The poor dears. Now look. I'm getting some heat from the Cabinet about how prices seem to be going up everywhere. I thought this competition thing was meant to bring prices down?

Commissioner: Oh Minister. That's a slightly simplistic view, though of course in the long term and under the right conditions prices should of course be lower than would be the case in non-competitive market and particularly ifahem

Minister (spluttering): And particularly if they've all made enough money from creaming consumers and building up money from their IPOs?

I'm beginning to think there was a good argument for the old semi-state monopoly. Pack the board with political hacks, get them to look for outrageous price increases and win the plaudits for turning them down.

Sure it was great gas back then. Only problem was if you inherited a chairman from the "wrong side" that was appointed by the previous government.

Commissioner: Minister, Minister. Take a drink of water there. You see you've put your finger on part of the problem. With your, ahem, usual perspicacity of course.

The change from the old model of inefficiencies to the new era of competition isn't always easy. Particularly when the former state-owned monopoly drags its heals and warns that some vital service to the public will be affected if it is forced to change too quickly, or that it will have to sack hundreds of people.

Those Eircom fellows were a whiz at that in the old days, though we now have the line rental down to the second highest in the EU, by the way.

How they managed to take it private and IPO it a third time was a wonder. And don't talk to me about the ESB

Minister: Yes, well let's talk about electricity prices. Before the market was liberalised prices were kept low. Then once "competition" came in they shot up, particularly for consumers.

The ESB's profits look very healthy to me. And the competitors still claim that there isn't a level playing field. This doesn't seem like a new era of competition and efficiency. Wasn't it all meant to be like air fares - introduce a Ryanair and see prices crash?

Commissioner: I can have a word with the five-person energy regulation panel, if you like, but they seem to be doing their best. Or with the regulator oversight board (by the way, they say they need more people).

But the problem is that it costs so much to build new power stations that if prices hadn't gone up a bit then we couldn't have attracted in new investment to create the, er, vibrant and competitive market that, that...

Minister: That we don't have today.

Commissioner: No, with respect Minister, what I was about to say was that I am confident we are now moving towards such a market.

I might also point out en passant that during the 1990s the Government and the ESB got in a stand-off about prices and building new power capacity and that this left us badly stuck for power.

Those blackouts in the winter of 2005 were particularly unfortunate. And of course we are making progress in the gas market.

The consultant's report on how to split Bord Gais into two separate organisations based in Dublin and Cork is nearly done. The Cork boys are particularly keen.

I think the unions might even buy it, though I'm sure they'll make a song and dance about what it would mean for the energy ESOT.

Minister: And dare I ask about the VHI ?

Commissioner: Well they did go into a bit of a huff there for a couple of years when they didn't get money under the risk equalisation scheme. But their appeal to Europe of the Supreme Court appeal on the judicial review is nearly over.

Remember they even slowed their price increase there for a while, though the others in the market said this was an abuse of a dominant position and it didn't last too long. And of course we now have a competitive market with three companies fighting for business and more looking at coming in

Minister: Which is little wonder with prices going up 15 per cent a year.

Commissioner: They say it's a necessary return to, er, encourage investment and competition

Minister: Oh enough talk , I have to go to Cabinet - apparently the commission has found a satisfactory e-voting machine.

Commissioner: Do you think you might be able to push through the decision on the second terminal in Dublin Airport?

Minister: Oh we'll be busy today. Next week, maybe, or the week after at the latest.