Overcast

Overcast

max temp: 19°C

min temp: 15°C

ESTD 1874 Search

Energy: Ofgem orders Competition and Markets Authority investigation into electricity and gas markets

11:57 26 June 2014

Ofgem has ordered a full competition investigation into the electricity and gas market.

Ofgem has ordered a full competition investigation into the electricity and gas market.

Archant

A full investigation should be held into the UK’s energy market in a bid to “rebuild” consumer trust, Ofgem ruled today.

shares

The electricity and gas regulator said the Competition and Markets Authority (CMA) probe should ensure “once and for all” that competition works effectively.

The investigation, expected to take around 18 months, will look at the relationship between the supply businesses and generation arms of the Big Six energy firms.

It will also study the Big Six’s profits, as well as any barriers to entering the market.

Ofgem chief executive Dermot Nolan said: “Now is the right time to refer the energy market to the CMA for the benefit of consumers.

“There is near-unanimous support for a referral and the CMA investigation offers an important opportunity to clear the air. This will help rebuild consumer trust and confidence in the energy market as well as provide the certainty investors have called for.

“The energy market is also going to change rapidly over the next few years with the roll-out of smart meters, the Government’s electricity market reforms, and closer integration with European energy markets.

“A CMA investigation should ensure there are no barriers to stop effective competition bearing down on prices and delivering the benefits of these changes to consumers.”

Ofgem said earlier this year that soaring household bills and intensifying public distrust highlighted the need for an investigation which will determine whether the Big Six companies were making excess profits, after they quadrupled to more than £1 billion in three years.

British Gas owner Centrica has previously warned that the probe could create uncertainty and threaten the billions of pounds worth of investment needed to keep the lights on.

Ofgem said the number of customers switching suppliers had fallen in recent years, while consumer trust had also slumped, with 43% saying they didn’t trust energy suppliers to be open and transparent in their dealings with them.

The regulator noted that the average retail profits for the big six had increased from £233million in 2009 to £1.1billion in 2012, while profits for supply and generation rose from £3bn to £3.7bn in the same period.

The CMA will begin its investigation immediately and is likely to publish final decisions by the end of 2015.

Energy Secretary Ed Davey said: “This is a major step towards ensuring that the UK’s energy market really does work for consumers and springs from the first annual competition assessment which I asked Ofgem and the CMA to undertake. Having a full energy market investigation with real teeth is something that the last government failed to do time and time again.

“Everyone should give their full support to this independent investigation. While it is under way we’re not slowing down the reforms that are giving people a better deal on their energy, including £50 taken off average household bills, the number of smaller energy suppliers almost trebling since 2010, faster and easier switching and simpler tariffs and bills.”

Caroline Flint, shadow energy and climate change secretary, said: “Rising energy bills are causing a cost-of-living crisis. That’s why Labour will break up the big energy companies, put an end to their secret deals, make tariffs simpler and fairer - and freeze energy bills until 2017.

“The launch of a full market investigation is a clear admission that Britain’s energy market is broken and that radical action is needed. However, it shouldn’t paralyse politicians from taking action now, so while this investigation is happening, consumers should be protected from any more unfair price rises by freezing energy bills until 2017.”

Which? executive director, Richard Lloyd, said: “This is a watershed moment for the broken energy market and millions of people struggling to cope with spiralling bills.

“The investigation must leave no stone unturned in establishing the truth behind energy prices, and while it takes place Ofgem must continue its renewed, tougher approach to protecting consumers. Energy companies must also not wait for the outcome of this inquiry but make urgent changes now to do better by their customers.

“We need to see radical reforms to fix the big six that will inject more competition into the market and help rebuild trust by giving consumers confidence that the price they are paying is fair.”

The CMA can decide which features of the market to focus on in its investigation and use its powers to address any structural and behavioural issues that would undermine competition.

Ofgem said it would expect the CMA to look at the relationship between the supply businesses and generation arms of the six largest suppliers; barriers to entry and expansion for suppliers; the profitability of the six largest suppliers; whether or not there is sufficient competition between the large energy suppliers; the trend of suppliers consistently setting higher prices for consumers who have not switched, and low consumer engagement that contributes to weak competitive pressure in the market.

shares

0 comments

Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files
Comments

Please log in to leave a comment and share your views with other East Anglian Daily Times visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by East Anglian Daily Times staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique East Anglian Daily Times account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

Ashley Gogan, Bedford Lodge

A four-star hotel in Newmarket has appointed a new face to head up its conference and events service.

Sheepen Place office development scheme at night - artist's impression

Proposals have been submitted for two new office buildings planned for central Colchester.

Greene King chief executive Rooney Anand, left, shaking hands with Mike Tye, chief executive of the Spirit Pub Company, outside Spirit's headquarters in Burton uponTrent following the sale deal.

Jobs are at risk at Greene King following a major acquisition earlier this year.

EDF workers are unhappy over pay.

Hundreds of workers at energy giant EDF are to stage a 24-hour strike in a row over pay.

Amos Smith who is launching a new yoghurt called Mossy's from a secret family recipe.

A popular yogurt made to a secret family recipe has been revived by a young food entrepreneur.

Land next to Burger King is for sale

Tesco, Mothercare and Toys R Us could soon have a new neighbour at Copdock Mill

A city worker looks at a stock ticker screen at the London Stock Exchange in the City of London.

Volatile stock market conditions took their toll again today as the FTSE 100 Index plunged after sharp gains in the previous session.

The Director General of the British Chambers of Commerce, John Longworth, has met with the Suffolk Chamber of Commerce in Ipswich to hear of their work delivering support to firms across the region.

The Director General of the British Chambers of Commerce, John Longworth, met with the Suffolk Chamber of Commerce in Ipswich to hear of their work delivering support to firms across the region last week.

Sainsbury's supermarket was only one of Britain's big four supermarkets to grow sales in the last three months - but still saw its number two spot in the sector retaken by Asda.

Sainsbury’s was the only one of Britain’s big four supermarkets to grow sales in the last three months - but still saw its number two spot in the sector retaken by Asda, according to latest industry data.

Family law expert Georgina Hall, now a partner at Prettys

East Anglia law firm Prettys, which has offices in Ipswich and Chelmsford, has announced the promotion of family law expert Georgina Hall to partner, bringing the total number of partners in the firm to 10.

Most read

Most commented

Topic pages