'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.













Scottish Power




British Gas












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


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 80.

    Time to kick these energy terrorists out - with their veiled threats of ' let us get our way unless you want the lights to go out'

    Scumbags of the highest order.

  • rate this

    Comment number 79.

    Energy wouldn't be so expensive if we didn't throw money at windmills.

  • rate this

    Comment number 78.

    "Independent" too often means, "available to any high bidder". You know... like in "Independent financial advisor" who proceed to sell you whatever has the highest kickback, sorry "commission", for the "independent" advisor.

    Follow The Money. Whenever you follow the money you realise why we've been boned for years and will remain always boned. There is no escape from this shackle.

  • rate this

    Comment number 77.

    The profit margin is less than Tesco and most supermarkets, does this not scream of over reaction and/or smoke screen for politicians

  • rate this

    Comment number 76.

    Increasing energy efficiency is a misnomer. The energy companies need to generate profit level X or above. If the consumer uses less energy due to efficiency, the energy companies have to raise prices to maintain profit levels. Face it folks you're stuck with high prices. The only real way to reduce prices is to remove the profit factor in the supply of energy.

  • rate this

    Comment number 75.

    Oh dear, looks like the energy cartel has been caught with their pants down. ED was right.
    What will the ol' boy network do? Easy, have an inquiry that will last until they have moved their money and it has all blown over.
    Pity Couson is not there to spin a good out come lol.

  • rate this

    Comment number 74.

    It may be better to compare other goods. When you want to buy anything the prices rarely vary by much at all. Everyone is at it. So much so there is a drive now to be the only seller of an item. We will buy this from you but only if no one else has it. That is how they avoid competition at selling. Energy cannot use this device, cheat. Most selling only competes at buying, not cutting their cost.

  • rate this

    Comment number 73.

    The energy companies are involved in a big game of poker - each waiting for the other to flinch. As prices go up, so they can afford more, the market responds by acknowledging this, which raises prices further. The nett result is that oil barons get fatter where oil and gas spurt out of the ground. One solution is to develop renewable energy sources relentlessly to get ourselves out of this loop.

  • rate this

    Comment number 72.

    it takes Russia two weeks to hold a referendum in the crimea with a forgone result
    why on earth is it going to take two years to investigate a cartel in Britain

  • rate this

    Comment number 71.

    OFGEM have already investigated them and found them all colluding in profiteering. Why another investiugation - Govt stalling for time to keep pals in the city loaded with bonuses? There was a time when Govt supplied All energy. They still made a profit but the 'service' for 'people' was very high and cheap. Now the service is poor & v expensive. Stop the billionaires. Nationalise them now.

  • rate this

    Comment number 70.

    Whilst I appreciate that energy costs impact significantly on household bills, we should not lose sight of the fact that our pension savings only grow because the pension funds can invest in profitable industries - the big 6 included! Any changes, whether voluntary or regulatory, need to be based on long term planning & impact, not short term gain.

  • rate this

    Comment number 69.

    I’ve just had an ‘Online Chat’ with SSE, asking when I will get the £50 Government Green Tariff reduction. They say that as I’m on a Fixed Tariff I will not get the money.

    How can that be fair?

  • rate this

    Comment number 68.

    Great news !
    The government gave the insurance companies loads of chances to buck up their ideas on the pension front, but they didn't take a blind bit of notice.....and now the energy sector have bought this upon themselves!

  • rate this

    Comment number 67.

    The country has a choice, let companies make a reasonable return on capital, or let the lights go out. Pay for power stations costing a few billion that last 40+ years or return to living in mud huts and caves. No amount of bodging with wind turbines and solar panels will keep the lights on. Sadly neither the coalition or the opposition have yet grasped the fundamental issue of energy security.

  • rate this

    Comment number 66.

    There should be a regulator for overblown pre election hype and sound bites from politicians that try to reel in the gullible and feeble minded. I suggest this regulator is called OFFSWITCH. I for one would subscribe as I am already sick of all this old tosh.

  • rate this

    Comment number 65.

    Anyone who voted for the privatisation of Utilities got what came to them in terms of their energy costs. Trouble is, those of us who didn't vote for privatisation of utilities came off worse regardless.

    Those households who have solar panels (and can afford them by whatever means), they are the only winners on this issue.

  • rate this

    Comment number 64.

    Any changes made will someway be in the favor of the big 6 just the same way as when they were told to simplify tariffs.

    There are now no "Zero Standing Charge Tariffs" offered by the big 6 and as the only appliance in my flat that uses gas is the hob, my gas bill will now jump from £10 p/a to £115 p/a.

    FYI Ebico works out lot more on electric so that's not a viable option for me either.

  • rate this

    Comment number 63.

    energy that pollutes must be taxed out of existence: like diesel.
    Ethanol and hydrogen is the way to go.

  • rate this

    Comment number 62.

    The average Joe on the street, politicians and media have little to zero understanding of how the energy market actually works. The big 6 energy companies will welcome this and have called for this enquiry stating that they don't have anything to hide. However, if a group of experts conclude that there is no anti-competitive behaviour I'm sure it won't do anything to appease the above people.

  • rate this

    Comment number 61.

    If this was anyone other than Ofgem, I'd have some small hope that something meaningful would be done about what is quite clearly, a cartel.

    Unfortunately, they appear to be mostly toothless.


Page 38 of 41


More Business stories


Business Live

    08:16: Paper review

    The Guardian splashes on a report from the Institute for Fiscal Studies which claims young workers have been hit hardest by a squeeze in standards of living. The FT digests Shell and US rival ConocoPhillips's investment cancellations. The Wall St Journal says bets against currency pegs, like Denmark's krone with the euro, are on the rise following Switzerland abandoning theirs. The Telegraph reports on a likely windfall for gas companies as wholesale costs drop.

    Google results Via Twitter Stephen Shankland Senior writer at CNET News

    tweets: Google's capital expenditures jumped $1.13 billion sequentially to $3.55 billion in 4Q2014. Data centers ain't cheap.

    07:50: Market update

    Japan's Nikkei index added about 0.4%, clawing back some of the 1.1% lost yesterday, while the Hong Kong Hang Seng index dropped 0.1%, to 24,570.01. Japanese factory output rose 1% from the previous month, below forecasts, while household spending fell more than expected, down 3.4% on a year ago.

    07:33: PPI investigation

    The Financial Conduct Authority, the City watchdog, is planning to "gather evidence on current trends in complaints on payment protection insurance," it says. It could then decide to do an advertising campaign, a time limit on complaints or keep things as they are.

    07:25: BT results

    BT have updated everyone on their pension fund situation and how they will deal with a £7bn deficit. BT will pay £1.5bn into the fund by the end of April 2015. This will be followed by £250m in each of the years to March 2016 and March 2017. Low interest rates have hit the fund.

    07:16: Qatar Airways
    Qatar Airways plane

    Qatar Airways has acquired stake of just less than 10% in BA and Iberia-owner IAG. There's a cap on non-EU ownership of European airlines, but Qatar Airways might up its stake in future, it says.

    07:05: BT results

    BT says third-quarter earnings before tax and interests costs rose 2% to £1.57bn. Gavin Patterson, chief executive says: "All the major communications providers are responding to the strong market demand for fibre broadband, helping to drive take-up in what is already a very competitive market."

    06:57: US growth data BBC Radio 4

    US growth figures will be reported later on. What's the likely result, Today asks Ewen Cameron Watt of Blackrock? "The rate of growth is slowing a little bit but not enough to raise serious concerns," he says. Expect a "stable but robust rate of growth."

    06:45: Greece Radio 5 live

    Guntram Wolff is the director of European think tank Bruegel, and he's on 5 live, talking about Greece. "It was a mistake that Greece joined the euro, but it would now be a mistake for it to leave," he says. "We will have to come to a deal that will have a lower burden on Greece. I essentially think you will keep the nominal amount [owed to bond investors] but you will increase the maturity.. from 30 to 40 or 50 years."

    06:30: Amazon results Radio 5 live

    More from Ewen Cameron Watt of investment manager Blackrock on 5 live. He is giving his views on US results overnight. "Amazon and Google both essentially reported that underlying demand over Christmas was pretty decent," he says. After tax, margins at Amazon are below 1%, he says.

    06:20: Trademark news Radio 5 live

    The phrases "this sick beat" and "nice to meet you, where you been" have been trademarked by singer Taylor Swift, 5 live reports. Laura Harper of law firm Shoosmiths says she is trying to stop other people making money by putting the phrases on a t-shirt or other merchandise. She will have to prove the phrases are "synonymous" with her, she says.

    06:09: Shell results Radio 5 live

    Ewen Cameron Watt of Blackrock is the markets guest on 5 live, talking about yesterday's results from Shell. "These are very historic results because they reflect an average price of $75" per barrel of oil, he says. Bearing in mind oil is below $50 today, "the pain is yet to come," he adds. The firm has cut $15bn of investments. The longer the price remains at this level, the more likely more investment cuts will come, he says.

    06:01: House building Radio 5 live

    Figures from the National House Building Council show there was a 9% rise in homes built last year to 145,174, but the rise missed the government's 200,000 home target. Peter Vella of Countryside Properties is on 5 live. NHBC's figures don't take into account all homes started or built, so the industry could be closer to the target than thought.

    06:00: Howard Mustoe Business reporter

    Good morning all. Overnight, online retail giant Amazon has reported weaker profits for the busy Christmas period. Stay tuned for the best business and economics news and get in touch via email bizlivepage@bbc.co.uk or on twitter @BBCBusiness



From BBC Capital


  • A person wears a mask at the Vevcani Carnival in MacedoniaThe Travel Show Watch

    The masked Balkan carnival attracting thousands to the streets of Vevcani

Copyright © 2015 BBC. 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.