'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".

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • 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.

 

Page 1 of 41

 

More Business stories

RSS

BBC Business Live

  1.  
    12:13: MARKET UPDATE

    European markets across the board have reversed their earlier declines and are now all trading higher, some of them by a reasonable amount. It's all based on a Reuters report that the European Central Bank could start buying corporate bonds in the secondary market as early as December as a way to combat deflation in the eurozone. The FTSE 100 is up 0.8% to 6317.50, Germany's Dax is up 1.56% to 8853.90, while France's Cac-40 is up 1.8% to 4063.04 .

     
  2.  
    11:55: TESCO PROFITS

    More from HSBC's Mr McCarthy. He also theorises as to what might be in Thursday's set of results. He says although Tesco has already identified a £250m shortfall in its first half finances, the results may now include "some impact of timing differences". So it could be some of the £250m hit comes back in the second half figures. He adds: "It could perhaps be that some commercial income was brought forward to flatter last year's full-year result, which would lower this year's profits but should normalise next year. Of course, it could also be that the £250m does not reflect the full effect of the overstatement."

     
  3.  
    11:40: PUBLIC SECTOR FINANCES
    Treasury

    Labour's Treasury spokesman Chris Leslie has responded to the borrowing figures saying they're a "serious blow to George Osborne". He adds: "Not only is he set to break his promise to balance the books by next year, but borrowing in the first half of this year is now 10% higher than the same period last year. As the OBR said last week, stagnating wages and too many people in low-paid jobs are leading to more borrowing."

     
  4.  
    11:27: SUPERMARKET SALES

    At the other end of the spectrum, Aldi's growth slowed slightly compared to recent months, but sales were still up 27% versus last year resulting in a market share of 4.8%. Lidl's sales grew by 18%, with its market share standing at 3.5%.

     
  5.  
    11:12: SUPERMARKET SALES

    Asda has again emerged as the winner among the big four supermarkets according to Kantar Wordpanel. Asda has grown sales ahead of the market, up 1% over the past year, boosting its share to 17.3%. Sales at Morrisons have fallen back 1.8% meanwhile.

     
  6.  
    10:59: SUPERMARKET SALES

    Waitrose secured a record grocery market share of 5.2%. Impressively, it has boosted its sales by 6.8% over the past year, continuously growing its sales every month since March 2009

     
  7.  
    10:44: SUPERMARKET SALES
    A group of Tesco trolleys

    So the overall grocery market saw growth of 0.7% in the 12 weeks to 12 October according to analysts Kantar Worldpanel. Tesco's market share over that period was 28.8% down from 30.1% a year earlier. Prices across the whole market also fell again. This time by 0.2%.

     
  8.  
    PUBLIC SECTOR FINANCES Via Email

    Economist Howard Archer says it is still possible higher rate taxpayers will have an positive impact on borrowing when they self-assess for the 20103/14 tax year in January. But at this rate it "looks inevitable... that extra fiscal tightening will be needed in the new parliament." Capital Economics meanwhile, suggests borrowing would have to be 37% lower over the next six months for the Chancellor to meet his £95.5bn target for the year. That seems... unlikely.

     
  9.  
    Via Twitter Kamal Ahmed BBC Business editor

    tweets: "Breaking: Kantar retail figures - Tesco sales down 3.6% year on year, Sainsbury's down 3.1%". We'll bring you the full numbers in a moment. But clearly not good news for Tesco ahead of its half year results on Thursday.

     
  10.  
    PUBLIC SECTOR FINANCES Via Twitter

    BBC Newsnight's economics editor Duncan Weldon tweets: "Unless the exchequer gets a huge self assessment bumper in January it looks like borrowing will be up this financial year on last."

     
  11.  
    PUBLIC SECTOR FINANCES 10:12: Via Email

    IHS Global Insight economist Howard Archer has a different take on the borrowing figures. He says: "The government's current fiscal problems largely reflect the fact that much weaker-than-expected earnings growth has limited income tax receipts, along with a large number of people now being in low-paid jobs or self-employed."

     
  12.  
    PUBLIC SECTOR FINANCES 10:00: Via Email

    Here's the line from the Treasury. It says: "We have seen stronger growth in receipts this month [that's true enough; income tax rose £200m, or 2.2%, to £10.7bn] but as today's figures show, the impact of the great recession is still being felt in our economy and the public finances. At the same time, we have to recognise that the UK is not immune to the problems being experienced in Europe and other parts of the world economy."

     
  13.  
    09:48: PUBLIC SECTOR FINANCES
    Public borrowing graph

    In the month of September itself government borrowing stood at £11.8bn. That's an increase of £1.6bn compared with the same month a year ago. We await the usual email from the Treasury telling us that income tax will be back-loaded into the year. But the Chancellor at this point looks increasingly likely to miss his £95.5bn borrowing target (as the chart above shows) for the financial year. Don't forget on Monday the FT reported that Treasury Secretary Danny Alexander told his colleagues in the Cabinet there was no money for any tax giveaways in this year's Budget and the Office for Budget Responsibility last week warning about income tax receipts.

     
  14.  
    09:33: PUBLIC SECTOR FINANCES

    Public sector net borrowing excluding public sector banks from April to September 2014 was £58bn, an increase of £5.4bn compared with the same period a year earlier, official figures show.

     
  15.  
    09:23: ASOS SHARES
    ASOS share price graph

    ....have leapt this morning after the publication of its annual results. The online retailer, which had warned on its profits on three occasions this year and suffered from a fire in one of its warehouses over the summer is up 17% to 2,275p.

     
  16.  
    09:14: TESCO PROFITS

    ...are not published until Thursday, so don't worry - you're not in a time warp. But the drip feed of information may have started already. HSBC analyst David McCarthy has put out a note today in which he says the supermarket behemoth will need to invest £3bn in its customer offer to achieve a turnaround. But he says most of that could be self-funded. Mr McCarthy adds: "Tesco has been going wrong for six years or more and it could take as long to put things right as it took to go wrong".

     
  17.  
    08:58: EUROSTAR GROWTH
    the new eurostar e320 train

    Eurostar has reported a 3% growth in passengers to 2.7 million for the three months to 30 September compared with a year earlier as well as 2% growth in revenue to £211m. Just last week the government announced its intention to sell its 40% stake in the firm it jointly owns with the French. Under the plan the government hopes to raise about £20bn from corporate and financial asset sales by 2020. Eurostar celebrates its 20th birthday on November 14th. It will unveil its new fleet (see above) to mark the occasion.

     
  18.  
    08:46: MARKET UPDATE

    Markets are down again today. The FTSE 100 in London fell 0.35%, the Dax in Frankfurt declined 0.31% and the French CAC dropped 0.11%.

    • ARM Holdings led the gainers up 2.5%
    • Reckitt Benckiser led the losers down 2.4%
    • Whitbread fell 2.2%
     
  19.  
    08:36: BAE BUYER

    BAE Systems continues its movement into cyber security, stumping up £144m for Perimeter Internetworking Corp, which trades as SilverSky, a cloud security firm. The purchase will add to earnings in three years, says the firm

     
  20.  
    08:24: TOTAL SHARES

    Shares in French oil firm Total are understandably lower this morning following the death overnight of the company's widely respected chief executive Christophe de Margerie in a plane crash in Moscow. Total has opened down nearly 3% to €42.94.

     
  21.  
    08:12: WHITBREAD
    General view of cup from a Costa Coffee shop,

    Revenue for the owner of Costa Coffee and Premier Inn was up 13% to £1.29bn for the six months ended 28 August. Whitbread chief executive Andy Harrison said: "The trading momentum of our strong first half performance has continued into the first few weeks of the second half and positions Whitbread well to deliver full year results in line with expectations."

     
  22.  
    08:00: GKN RESULTS

    GKN, which makes parts of planes and cars, said sales fell of the third quarter - that's July to September - but profit rose. A stronger pound than last year caused much of the lost revenue. For the rest of the year, the motor and aerospace market will grow, while agriculture "looks set to continue its recent decline," it says.

     
  23.  
    07:50: ARM CHIPS BBC Radio 4

    Simon Segars the boss of chipmaker ARM is on the Today programme. He says lots of companies license his firm's tech so he's not worried about competition from the likes of Intel, which is now targeting ARM's market. "Competition is a good thing," he says. He adds: "History has shown the technology solution that we produce is the one that goes into most devices. Virtually every smartphone in the world uses an ARM processor". So, safe to say he's not worried in the slightest then.

     
  24.  
    07:35: ASOS PROFITS DOWN
    ASOS webpage screengrab

    Online retailer ASOS has reported as 14% slump in profits to £46.9m. Last year ASOS reported profits of £54.7m. There are no surprises here, though. The firm has previously warned "disruption" from investment in warehousing and the launch of its new business in China would hurt profits and that remains the case. Boss Nick Robertson says the firm is "in a period of major investment that comes at a short term cost, but the medium-term benefits will be significant."

     
  25.  
    07:20: ARM CHIPS
    chip

    ARM, which could well make the chips in your mobile phone, says it made $320m (£195.5m) of sales in the third quarter, up 12% compared with last year. It will probably sell $350m in the final three months of the year, it said.

     
  26.  
    07:10: RECKITT RESULTS
    Reckitt Benckiser products

    Reckitt Benckiser says it now expects full year revenue growth at the lower end of its total revenue growth target of 4-5%. The firm "delivered a robust performance in tougher markets in the third quarter" it said.

     
  27.  
    07:00: CHINA GROWTH BBC Radio 4

    China's economy grew by 7.3% in the three months to September, compared with expectations of 7.2%. But it's still the lowest growth in six years. The BBC's Chief Business Correspondent Linda Yueh tells the Today programme Chinese monetary policymakers want to slow the Chinese economic growth gradually and allow the rest of the world to get used to it. China is becoming a "middle income economy" she says and will revert to a normal path for a developed economy over time of around 3% to 4%.

     
  28.  
    Via Twitter Linda Yueh Chief business correspondent

    tweets: My interview with CEO of Oscar de la Renta fashion house, Alex Bolen, from Talking Business

     
  29.  
    06:41: ENGINEERING SKILLS Radio 5 live

    We don't have enough engineers in the UK or scientists for that matter argues Ann Watson of Semta, an engineering skills charity, on 5 live. She says: "We need a million scientists, engineers and technicians by 2020, We are starting to see a shortage in education; people training those recruits." The perception of engineering as a "dirty, oily industry" doesn't help, she says.

     
  30.  
    06:30: STOCK MARKET Radio 5 live

    Jane Foley, senior currency strategist at Rabobank is on 5 live talking about the falling stock market. "If we see stocks fall more we may see companies bargain hunting," she says. So more firms may start purchasing each other.

     
  31.  
    06:21: HEATHROW TRAVEL Radio 5 live
    heathrow

    Travel writer Simon Calder is on 5 live talking about the weather. He says he sees about 50 weather-related cancellations at Heathrow, so perhaps about 5% of flights so far. Flights to Frankfurt look hard to come by, he says.

     
  32.  
    06:12: FLIGHTS CANCELLED

    Heathrow airport has said this morning that around 10% of flights will be cancelled today as the remnants of Hurricane Gonzalo hit the UK. Flights with the 20 biggest carriers would be affected, it says. British Airways has already cancelled some ahead of the expected severe weather. The remains of the hurricane are predicted to bring heavy rain and gusts of up to 75mph in some areas, causing disruption to rush-hour travel. If you're travelling today it's worth checking before you arrive at the airport.

     
  33.  
    06:02: TOTAL CEO DEATH Radio 5 live

    Christophe de Margerie, the chief executive of French oil company Total, has died in an air crash in Moscow. Sarah Rainsford, the BBC's correspondent in Moscow says poor weather with low visibility is a possible cause of the crash. His plane crashed when it collided with a snow-clearing machine killing him and three crew, she tells 5 live.

     
  34.  
    06:01: Howard Mustoe Business reporter

    Good morning! Get in touch via email bizlivepage@bbc.co.uk or on twitter @BBCBusiness.

     
  35.  
    06:00: Matthew West Business reporter

    Morning folks, we have the latest public borrowing figures out at 9:30 today. But before that we have full year results from online retailer ASOS, and interim figures from Whitbread, plus the weather is promising to play havoc with the transport network today with 10% of flights out of Heathrow already cancelled this morning. We'll bring you everything as it happens.

     

Features

From BBC Capital

Programmes

  • Smart glassesClick Watch

    Smart spectacles go into battle – the prototypes looking to take on Google Glass

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.