'Big six' energy firms face competition inquiry

 

Dermot Nolan, Ofgem: "No evidence of cartel, but weak competition"

Regulators will investigate whether the "big six" UK energy suppliers prevent effective competition in the UK energy market.

A report by regulator Ofgem has called for an investigation by the Competition and Markets Authority (CMA) which could take 18 months.

Centrica boss Sam Laidlaw said it would cause delays to investment and "an increasing risk" of blackouts.

The Ofgem report has criticised the effectiveness of competition.

It finds "possible tacit co-ordination" on the size and timing of price rises, but does not accuse the major energy firms of colluding over prices.

Start Quote

Now consumers are protected by our simpler, clearer and fairer reforms, we think a market investigation is in their long-term interests”

End Quote Dermot Nolan Ofgem chief executive

The BBC's Industry Correspondent John Moylan said the report also cited low levels of switching by consumers and the fact that the market shares of the big six suppliers had not changed significantly over time.

Richard Lloyd, executive director of the consumer group Which, said the regulator's report was effectively admitting that it had not done enough to regulate the market.

'Clear the air'

The big six - SSE, Scottish Power, Centrica, RWE Npower, E.On and EDF Energy - account for about 95% of the UK's energy supply market.

Ofgem is now referring the market to the CMA - the new competition body - "to consider once and for all whether there are further barriers to effective competition".

All the major energy companies have welcomed the referral.

But Sam Laidlaw, Centrica chief executive, said he hoped "a lengthy review process will not damage confidence in the market, when over £100bn of investment in new infrastructure is needed".

When questioned on the BBC Radio 4's Today programme over whether it would mean power outages he said: "There is an increasing risk. A lot can be done in terms of demand management, but actually building a new gas power station does take four years.

"So that's the kind of time pressure we are up against, by adding another two years that makes it six years."

Energy Secretary Ed Davey: "This review will help clear the air"

However, the Energy Secretary, Ed Davey said: "He is absolutely, totally wrong and I can prove it. We have 14 contracts for power generation [in the pipeline] over the next 15 years.

"What we are seeing in Britain is a big investment in energy.

"It is true that companies like Centrica are not investing as much as we might like them to but we are seeing independent energy generation firms like Siemens coming in in their place."

Today Centrica confirmed it would not proceed with plans for a new gas-fired plant, due in large part to today's investigation being triggered.

Profit increases

Ofgem's report also says profit increases and recent price rises have intensified public distrust of suppliers and have also highlighted the need for a market investigation "to clear the air".

How much have energy bills ended up rising?

Supplier 2013 average bill cost 2014 average bill cost Average price increase

Source: Uswitch based on 3,200kwh of electricity consumption, and 13,500 kwh of gas. Dual fuel standard tariffs. Payment by cash or cheque on quarterly basis.

E.On

£1,226

£1,240

1.1%

EDF

£1,190

£1,237

3.9%

SSE

£1,211

£1,259

4.0%

Scottish Power

£1,230

£1,284

4.4%

British Gas

£1,191

£1,265

6.2%

Npower

£1,220

£1,299

6.5%

Average

£1,212

£1,264

4.3%

Dermot Nolan, Ofgem chief executive, said: "The CMA has powers, not available to Ofgem, to address any structural barriers that would undermine competition.

"Now consumers are protected by our simpler, clearer and fairer reforms, we think a market investigation is in their long-term interests. "

When asked on the Today Programme whether there would be a breakup of the six largest suppliers Mr Nolan said: "It's possible, (but) I couldn't guess what the Competition and Markets Authority will do".

Tim Yeo, Chairman of the Energy Select Committee said he thought a breakup of the companies was the most likely conclusion of the investigation. He said: "You could cut to the chase and say let's get on with it now.

Centrica boss Sam Laidlaw (l) and SSE boss Alistair Phillips-Davies give their views

"I think that would be the quickest way to restore confidence of consumers in the industry.

"I also think it would remove some of the risks of the lights going out, because investment could take place now."

The report comes a day after supplier SSE announced it was freezing prices until January 2016, putting pressure on rivals to do the same.

SSE whose companies include Swalec said the freeze would lower profits, but that it would "streamline" its business to cover the shortfall.

'Restore confidence'

The energy sector has been at the centre of strident political debate since last summer.

This began with Labour leader Ed Miliband's party conference speech, in which he pledged to freeze energy prices for 20 months if Labour were elected.

He also vowed to abolish the current energy regulator, Ofgem, and replace it with a new regulatory regime that ensured consumers got a "fair deal".

Caroline Flint fears inquiry will delay tougher action against energy firms

Caroline Flint, Labour's shadow energy secretary, asked for the investigation to include Ofgem itself and said: "Isn't today's decision a clear admission that Ofgem has failed to protect consumers?"

The road towards a full inquiry into competition in the market was announced by Ed Davey, the energy secretary, in February.

He wrote to regulators to say that the profit margins made by the six major energy suppliers in the UK were higher than previously thought.

E.On UK chief executive Tony Cocker has now said an investigation was the only way "to restore full public confidence to the energy sector and depoliticise the whole issue".

 

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  • rate this
    0

    Comment number 820.

    A few solar panels some technology from MAX866/MAX867 Good place to start An invertor , a rechageable battery some mciro electronics, and who knows hmm? a few leds , TPS61200, A solar tracker , Solar heating , A windmill , Toys that kids play and acouple of dc motors a clockwork engine Better than clockwork orange

    So easy if only you would stop arguing

  • rate this
    0

    Comment number 819.

    I still don't understand why the energy sector expects consumers to pay more to be able to buy energy at a later date.

    All other sectors of business maintaining your supply of product to sell is the businesses problem not the consumers so this threat of the lights going out sounds quite hollow

  • rate this
    0

    Comment number 818.

    The left tells us that we're being ripped off by business when it is the left that rips us off by squandering our money on lunatic ideas like global warming.

    Global warming is a hoax. Get over it.

    Quangos (self-appointed and anointed members of the Great and the Good who pretend that they know more about business than those that successfully run businesses) know very little about anything.

  • Comment number 817.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 816.

    811 - Nationalising our natural resources is hardly going "full Communist" (only to an extremist who can't let go of failed free market ideals). Take a look at EDF, a (French) state-owned company that is doing so well that they have cornered the UK market and the UK Government are literally giving them taxpayer's money!

    I'll leave you to check for 'reds under the bed'. Goodnight and Goodluck.

  • rate this
    0

    Comment number 815.

    "Democracy" live....

  • rate this
    0

    Comment number 814.

    If you considered my proposal and put this into actions rather than arguing about this what would you create I wonder That choice I guess is either waste precious time and money Or be the first to put them out of action simply by placing the correct investment without even having to fight against them Be the first to make change to your own futures, be different !!

  • rate this
    +1

    Comment number 813.

    So in two years time we'll be told their were some minor irregularities and things could be improved a little by tweeking things and that will be that.
    I have no hope or expectations from this. Just more 'politicking'.

  • rate this
    0

    Comment number 812.

    811.Henry Hazlitt

    "Heck, if it works in energy, why stop there, why not nationalise everything and go full Communist? What do you think, that will work! Right?

    -Cue evasion"

    Cue another self parody and more guff from the self proclaimed neo-liberal guru who never sleeps.

  • rate this
    0

    Comment number 811.

    MyDogAteMyWelly
    How insightful... Still waiting for that link that bothered you so much.

    Do you think of we re-nationalise the whole energy sectory, we'd be better off?

    Heck, if it works in energy, why stop there, why not nationalise everything and go full Communist? What do you think, that will work! Right?

    -Cue evasion

  • rate this
    0

    Comment number 810.

    804 "just empty words, unsupported by any reason" - I think that's what Freudians call 'Projection'.

    Removing "regulatory hurdles" is hardly going to help when the cause is a cartel of the Big 6. And expecting a minnow, with *genuinely* no control of the price of energy to come in and reduce the nation's bills is absurd.

  • rate this
    +1

    Comment number 809.

    799.Henry Hazlitt

    'We don't need an expensive inquiry to tell us what we already suspect; that there is a pseudo cartel in existence.'

    No, but we do need suggestions as to how to rectify the market.

    BTW my solution would be to renationalise.

  • rate this
    +1

    Comment number 808.

    See up folks,another givernment fudge on the way.
    Don't be fooled by this,the government make far too much money out of energy taxes to really want to do anything about prices.

  • rate this
    0

    Comment number 807.

    Ther are two way to examine this either waste public money on a massive enquiry or ignore them whilst taking that money and instead of wasting your time endless months costing this country a small fortune and re investing that type of capital on a scheme which will eventually lead to the total collapse of those companies that you are whishing to call to justice possibly even losing such a case

  • rate this
    +3

    Comment number 806.

    What worries me more than the price of gas or electricity is the rise of non state actors such as the energy companies and banks who seem to be able to defeat the policies of an elected government. They are too big for their own boots and have become arrogant and out of touch from their customers as a result.

  • rate this
    0

    Comment number 805.

    @45. revolutionnow999

    In order to give customers true choice, a not for profit government supplier should also be set up to provide energy. I would buy my energy from it knowing I wasn’t paying shareholder dividends or fat cat boardroom salaries. And I would hope that the people who actually delivered the service got decent pay.

    --

    There is always the Co-Op.......

  • rate this
    0

    Comment number 804.

    801.Al Gore
    Unfortunately, blinkered interpretations like yours simply add further weight to the argument for an inquiry.
    =
    "Unfortunately," these are just empty words, unsupported by any reason, just so you can be seen to disagree.

    I agree, they probably are "operating as a cartel."

    It's those "regulatory hurdles" that cultivated the cartel, but deterring would-be competitors.

  • rate this
    +1

    Comment number 803.

    99.Henry Hazlitt

    Go tol bed... You could power a small city the ammount of time you have spent on HYS spouting silly neo-liberal guff.

  • rate this
    0

    Comment number 802.

    One way to begin an interest is to take something apart and put it back together in a different format such that it incites or excites those parts of gray skull that other electromagnetic potential and kinetic waves have not quite reached and could this far extend the discoveries of madam curie Hopefully we are now approaching the same wavelength

  • rate this
    0

    Comment number 801.

    799 - Unfortunately, blinkered interpretations like yours simply add further weight to the argument for an inquiry. They are clearly operating as a cartel and as this is against the law - removing "regulatory hurdles" is hardly the approach to take with criminals, unless we just accept with futility that we are a corrupt state.

 

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