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| Energy firms' gas profit margins questioned by minister | Energy firms' gas profit margins questioned by minister |
| (35 minutes later) | |
| The profit margins made by the "big six" energy companies when supplying gas are much higher than previously thought, the energy secretary has said. | |
| In a letter to regulators seen by the BBC, Ed Davey specifically questions the dominance of British Gas. | In a letter to regulators seen by the BBC, Ed Davey specifically questions the dominance of British Gas. |
| He says its profit margin is one of the industry's highest and, with 41% of the market, it has the largest share. | He says its profit margin is one of the industry's highest and, with 41% of the market, it has the largest share. |
| British Gas said the data had already been fully disclosed and that it would participate in further discussions. | British Gas said the data had already been fully disclosed and that it would participate in further discussions. |
| 'Think radically' | 'Think radically' |
| The energy secretary has asked the competition authorities to investigate the profit margins as part of an ongoing review. | The energy secretary has asked the competition authorities to investigate the profit margins as part of an ongoing review. |
| He has written to the energy regulator, Ofgem, as well as the Competition and Markets Authority, asking them to consider all possible remedies "including a break-up of any companies found to have monopoly power to the detriment of the consumer". | He has written to the energy regulator, Ofgem, as well as the Competition and Markets Authority, asking them to consider all possible remedies "including a break-up of any companies found to have monopoly power to the detriment of the consumer". |
| Mr Davey told the BBC: "This is a significant issue for consumers out there who are struggling with their energy bills." | Mr Davey told the BBC: "This is a significant issue for consumers out there who are struggling with their energy bills." |
| He said he wanted to make it easier for the consumer to switch supplier, highlighting the 15 independent suppliers which currently challenge the "big six". | He said he wanted to make it easier for the consumer to switch supplier, highlighting the 15 independent suppliers which currently challenge the "big six". |
| Mr Davey said he wanted regulators to "think radically", in respect to a possible break-up of the big six, adding it was "not for a minister" to break up companies. | |
| A lack of transparency had been a problem in deciphering the energy companies' cost margins to date, he said. | A lack of transparency had been a problem in deciphering the energy companies' cost margins to date, he said. |
| The cost of energy has been a big debate since Labour leader Ed Miliband pledged to freeze energy prices for 20 months if he were elected. | The cost of energy has been a big debate since Labour leader Ed Miliband pledged to freeze energy prices for 20 months if he were elected. |
| A series of above-inflation price rises by the major energy suppliers has also sparked consumer anger. | A series of above-inflation price rises by the major energy suppliers has also sparked consumer anger. |
| Mr Davey said that so far the debate on energy prices had centred mainly on the electricity market, but that gas accounted for two-thirds of an energy bill for most households. | Mr Davey said that so far the debate on energy prices had centred mainly on the electricity market, but that gas accounted for two-thirds of an energy bill for most households. |
| 'Monopoly position?' | 'Monopoly position?' |
| "Analysis of the profit margins of the energy companies shows that the average profit margin for gas is around three times that of electricity," his letter says. | "Analysis of the profit margins of the energy companies shows that the average profit margin for gas is around three times that of electricity," his letter says. |
| "There is also evidence that British Gas, the company with the largest share of the gas domestic supply market, has tended to charge one of the highest prices over the past three years, and has been on average the most profitable," he adds. | "There is also evidence that British Gas, the company with the largest share of the gas domestic supply market, has tended to charge one of the highest prices over the past three years, and has been on average the most profitable," he adds. |
| And in an accompanying analysis note he says: "Does this indicate that British Gas has a strong monopoly position which enables it to generate high profit margins?". | And in an accompanying analysis note he says: "Does this indicate that British Gas has a strong monopoly position which enables it to generate high profit margins?". |
| Mr Davey estimates that if margins in gas were similar to electricity, the average saving per household could be up to £40 a year. | Mr Davey estimates that if margins in gas were similar to electricity, the average saving per household could be up to £40 a year. |
| In its statement, British Gas said: "There is an ongoing independent market assessment being conducted by the Office of Fair Trading, Ofgem and the Competition & Markets Authority. | In its statement, British Gas said: "There is an ongoing independent market assessment being conducted by the Office of Fair Trading, Ofgem and the Competition & Markets Authority. |
| "We welcome this and have complied with all the requests for data which we have received. | "We welcome this and have complied with all the requests for data which we have received. |
| "The data referred to in the Secretary of State's letter has already been fully disclosed and in the public domain for a number of weeks." | "The data referred to in the Secretary of State's letter has already been fully disclosed and in the public domain for a number of weeks." |
| 'Hugely significant' | 'Hugely significant' |
| The BBC's John Moylan said that, given that the information had been publicly available for months, it raised questions as to why the regulator, Ofgem, had not acted already. | The BBC's John Moylan said that, given that the information had been publicly available for months, it raised questions as to why the regulator, Ofgem, had not acted already. |
| Richard Lloyd, the executive director of the consumer rights group Which?, said the intervention was "hugely significant" and that it implied that Ed Davey agreed with Which? "that the structure of the biggest energy companies is partly to blame for the price hikes that millions of squeezed customers have been struggling with." | Richard Lloyd, the executive director of the consumer rights group Which?, said the intervention was "hugely significant" and that it implied that Ed Davey agreed with Which? "that the structure of the biggest energy companies is partly to blame for the price hikes that millions of squeezed customers have been struggling with." |
| "It will now put huge pressure on the regulators, in a matter of weeks, to announce that they're taking the first steps towards potentially breaking up the very biggest of the big energy companies," he added. | "It will now put huge pressure on the regulators, in a matter of weeks, to announce that they're taking the first steps towards potentially breaking up the very biggest of the big energy companies," he added. |
| Tables accompanying Mr Davey's letters show that Centrica, which owns British Gas, saw profit margins of 11.2% for its gas business in 2012 and a 41% share of the gas market. | Tables accompanying Mr Davey's letters show that Centrica, which owns British Gas, saw profit margins of 11.2% for its gas business in 2012 and a 41% share of the gas market. |
| SSE also has a high profit margin of 11.4% but a much smaller market share; therefore this was not seen as such a problem. | SSE also has a high profit margin of 11.4% but a much smaller market share; therefore this was not seen as such a problem. |
| Rival EDF made a 4.1% loss on gas in 2012. | Rival EDF made a 4.1% loss on gas in 2012. |
| The analysis compares this with the profit margins of supermarkets which typically range from 3.5% to 5%. | The analysis compares this with the profit margins of supermarkets which typically range from 3.5% to 5%. |
| There has been much discussion and anger in recent months over energy price rises. | There has been much discussion and anger in recent months over energy price rises. |
| Last year, the government changed its plan for a green levy on the industry in order to persuade the major energy companies to reduce the proposed increase in bill prices. | Last year, the government changed its plan for a green levy on the industry in order to persuade the major energy companies to reduce the proposed increase in bill prices. |
| That followed Labour's pledge to freeze energy prices for 20 months for every home and business if it won the 2015 election. | That followed Labour's pledge to freeze energy prices for 20 months for every home and business if it won the 2015 election. |