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Regulators may launch investigation into big six energy firm next week Regulators may launch investigation into big six energy companies next week
(about 1 hour later)
The big six gas and electricity suppliers are steeling themselves for a full competition inquiry beginning next week, amid repeated accusations that the companies have used their market dominance to ramp up prices and make excessive profits. The big six gas and electricity suppliers are steeling themselves for a full competition inquiry beginning next week, against a background of accusations that the companies have used their market dominance to ramp up prices and make excessive profits.
The financial, energy and consumer regulators have spent the last three months reviewing the workings of the market and are expected to publish a final report on Thursday.The financial, energy and consumer regulators have spent the last three months reviewing the workings of the market and are expected to publish a final report on Thursday.
The Competition and Markets Authority (CMA), which has been working on the government-commissioned report with industry watchdog Ofgem and the Office of Fair Trading, will provide the latest detailed information on market share, relationships with customers and profit levels in different parts of the business. The report is intended to be a first annual study but is weighted with particular significance and could recommend no change, specific reforms or a fuller investigation by the CMA – which was created by the coalition to replace the Competition Commission as the lead competition body.The Competition and Markets Authority (CMA), which has been working on the government-commissioned report with industry watchdog Ofgem and the Office of Fair Trading, will provide the latest detailed information on market share, relationships with customers and profit levels in different parts of the business. The report is intended to be a first annual study but is weighted with particular significance and could recommend no change, specific reforms or a fuller investigation by the CMA – which was created by the coalition to replace the Competition Commission as the lead competition body.
Westminster insiders said there was intense pressure from the government on the regulators for a full competition inquiry, which could take 18 months to complete. "Ministers would love the whole public and political row over power prices to be kicked into the long grass until after the next general election (of 2015)," said one source. Westminster insiders said there was intense pressure from the government on the regulators for a full competition inquiry, which could take 18 months to complete. "Ministers would love the whole public and political row over power prices to be kicked into the long grass until after the next general election," said one source.
A senior industry insider told the Guardian: "We do not know for sure what the report will say but it is fair to say we expect an inquiry due to the political pressure."A senior industry insider told the Guardian: "We do not know for sure what the report will say but it is fair to say we expect an inquiry due to the political pressure."
David Cameron announced the review in October last year in order to "get to the bottom of whether this market can be made more competitive." As recently as last month, Ed Davey, the energy and climate change secretary, kept up the pressure by writing to Ofgem to highlight the dominance of British Gas in the market. David Cameron announced the review in October in order to "get to the bottom of whether this market can be made more competitive." As recently as last month, Ed Davey, the energy and climate change secretary, kept up the pressure by writing to Ofgem to highlight the dominance of British Gas in the market.
The row over high power prices, which has been simmering for years, took off last autumn when Ed Miliband told the Labour party conference that his government would freeze energy prices for 20 months from 2015 if Labour won the election. The opposition leader also said that Ofgem would be abolished and the large power companies broken up when the anger against energy companies escalated as household fuel prices were increased by around 10% in November. Soon after Miliband's intervention, Cameron announced his promise of an annual energy competition review, with next week's report representing its debut. The row over high power prices, which has been simmering for years, took off last autumn when Ed Miliband told the Labour party conference that his government would freeze energy prices for 20 months from 2015 if Labour won the election. The opposition leader said Ofgem would be abolished and the large power companies broken up when the anger against energy companies escalated as household fuel prices were increased by around 10% in November.
Soon after Miliband's intervention, Cameron announced his promise of an annual energy competition review, with next week's report representing its debut.
Ofgem declined to comment on when the three regulators might publish their report or what it might say, but it has always argued that it remains strictly independent and stands apart from the political process. The regulator knows that it will come under attack if it does not deliver a full inquiry given the unease about accusations of profiteering and rising fuel poverty in Britain.Ofgem declined to comment on when the three regulators might publish their report or what it might say, but it has always argued that it remains strictly independent and stands apart from the political process. The regulator knows that it will come under attack if it does not deliver a full inquiry given the unease about accusations of profiteering and rising fuel poverty in Britain.
Consumer group Which? has called for a deeper investigation after revealing that there were 5.5 million complaints by big six customers last year alone. Consumer group Which? has called for a deeper investigation after revealing that there were 5.5m complaints by big six customers last year alone.
Even Tony Cocker, chief executive of E.ON UK, one of the big six, has himself written to the prime minister, secretary of state and Ofgem to call for a full Competition Commission inquiry. He told MPs that he hoped this would "depoliticise" a debate that energy bosses say is destroying investor confidence in the UK market. Even Tony Cocker, chief executive of E.ON UK, one of the big six, has written to the prime minister, secretary of state and Ofgem to call for a full Competition Commission inquiry. He told MPs that he hoped this would "depoliticise" a debate that energy bosses say is destroying investor confidence in the British market.
Power companies have repeatedly claimed that their industry is being used as a political football but critics insist the problems are self-inflicted and point to a series of multimillion pound fines for mis-selling, which have been announced alongside rising profits. There have also been rows about low tax payments and a failure to hand over excess cash balances. Power companies have repeatedly claimed that their industry is being used as a political football, but critics insist the problems are self-inflicted and point to a series of multimillion pound fines for mis-selling, which have been announced at the same time as news of rising profits. There have also been rows about low tax payments and a failure to hand over excess cash balances.
Citizens Advice claimed that gas and electricity prices had risen up to eight times higher than increases in average weekly earnings. The charity projected last November that by January of this year the big six suppliers would have raised their prices by 37% since October 2010. The average annual dual-fuel bill – for gas and electricity – is £1,315 per household. Citizens Advice claimed that gas and electricity prices had risen by up to eight times more than increases in average weekly earnings. The charity projected last November that by January of this year the big six suppliers would have raised their prices by 37% since October 2010. The average annual dual-fuel bill – for gas and electricity – is £1,315 per household.
In fact prices have fallen slightly as the government has taken steps to lift the cost of various energy efficiency and other "green" measures from bills. The chancellor's budget on Wednesday froze planned increases in the carbon floor price that was meant to be used to drive out dirtier fossil fuels in favour of those that emit low levels of or noCO2.In fact prices have fallen slightly as the government has taken steps to lift the cost of various energy efficiency and other "green" measures from bills. The chancellor's budget on Wednesday froze planned increases in the carbon floor price that was meant to be used to drive out dirtier fossil fuels in favour of those that emit low levels of or noCO2.