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| Big six energy suppliers could be broken up after Ofgem triggers full investigation | Big six energy suppliers could be broken up after Ofgem triggers full investigation |
| (about 4 hours later) | |
| The energy watchdog Ofgem has promised the biggest investigation ever into the gas and electricity markets after confirming hard evidence of soaring corporate profits and plunging consumer confidence. | The energy watchdog Ofgem has promised the biggest investigation ever into the gas and electricity markets after confirming hard evidence of soaring corporate profits and plunging consumer confidence. |
| The inquiry by the Competition and Markets Authority (CMA) could lead to the big six power companies such as British Gas and RWE npower being forcibly broken up to separate their supply and generation arms. | The inquiry by the Competition and Markets Authority (CMA) could lead to the big six power companies such as British Gas and RWE npower being forcibly broken up to separate their supply and generation arms. |
| A deep review could take up to two years to complete but Ofgem warned of much higher fines amounting to "tens of millions of pounds" against companies breaking the rules in the meantime. | A deep review could take up to two years to complete but Ofgem warned of much higher fines amounting to "tens of millions of pounds" against companies breaking the rules in the meantime. |
| British Gas said the uncertainty could hasten the lights going out by deterring new power plant construction. But Dermot Nolan, the newly installed chief executive of Ofgem, denied this, saying the review would "enhance confidence in the investment climate". | British Gas said the uncertainty could hasten the lights going out by deterring new power plant construction. But Dermot Nolan, the newly installed chief executive of Ofgem, denied this, saying the review would "enhance confidence in the investment climate". |
| The decision to call for a full inquiry into the way the energy markets work follows a mounting outcry from consumers and then politicians about rising bills and soaring fuel poverty in Britain. | The decision to call for a full inquiry into the way the energy markets work follows a mounting outcry from consumers and then politicians about rising bills and soaring fuel poverty in Britain. |
| Nolan said an initial look at the market over recent months by Ofgem, the Office of Fair Trading and the CMA had not been driven by political pressure but by increasing evidence of market dysfunction. | Nolan said an initial look at the market over recent months by Ofgem, the Office of Fair Trading and the CMA had not been driven by political pressure but by increasing evidence of market dysfunction. |
| "Ofgem believes a referral offers the opportunity to once and for all clear the air and decide if there are any further barriers which are preventing competition from bearing down as hard as possible on prices," he said. | "Ofgem believes a referral offers the opportunity to once and for all clear the air and decide if there are any further barriers which are preventing competition from bearing down as hard as possible on prices," he said. |
| "I want to make sure that consumers are put at the heart of this market, so we will continue to take action to help consumers. This includes from today putting the industry on notice that any new serious breach of the rules which comes to light will be likely to attract a higher penalty from Ofgem." | "I want to make sure that consumers are put at the heart of this market, so we will continue to take action to help consumers. This includes from today putting the industry on notice that any new serious breach of the rules which comes to light will be likely to attract a higher penalty from Ofgem." |
| Ofgem said it found that 43% of customers distrusted energy companies to be clear and honest about prices, and that suppliers' retail profits had risen to £1.1bn in 2012 from £233m in 2009. Suppliers consistently set higher prices for existing consumers compared with those who have switched. | Ofgem said it found that 43% of customers distrusted energy companies to be clear and honest about prices, and that suppliers' retail profits had risen to £1.1bn in 2012 from £233m in 2009. Suppliers consistently set higher prices for existing consumers compared with those who have switched. |
| The suppliers – Centrica (which owns British Gas), SSE, RWE npower, E.ON, Scottish Power and EDF Energy – control 95% of the market for retail supply. | The suppliers – Centrica (which owns British Gas), SSE, RWE npower, E.ON, Scottish Power and EDF Energy – control 95% of the market for retail supply. |
| The regulator said its own review had found that consumer trust had fallen and there was no clear evidence that companies had tried to cut their costs while retail bills more than quadrupled in three years. | The regulator said its own review had found that consumer trust had fallen and there was no clear evidence that companies had tried to cut their costs while retail bills more than quadrupled in three years. |
| Sam Laidlaw, the chief executive of Centrica who earned £2.2m last year but has donated £851,000 of his bonus to charity, said a long inquiry could damage investment when Britain's energy security was in question because of a lack of new power stations being built. | Sam Laidlaw, the chief executive of Centrica who earned £2.2m last year but has donated £851,000 of his bonus to charity, said a long inquiry could damage investment when Britain's energy security was in question because of a lack of new power stations being built. |
| When questioned on the BBC Radio 4's Today programme about 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." | When questioned on the BBC Radio 4's Today programme about 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." |
| Davey, who wrote last month to Ofgem and the CMA questioning the dominance in the gas market of British Gas and questioning whether there should be a breakup of large companies, said: "He [Laidlaw] 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." | Davey, who wrote last month to Ofgem and the CMA questioning the dominance in the gas market of British Gas and questioning whether there should be a breakup of large companies, said: "He [Laidlaw] 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." |
| British Gas and other members of the big six have repeatedly warned that the lights could go out – most vociferously when Ed Miliband told the party annual conference last autumn that an incoming Labour government would force companies to freeze prices, break up the big six and dismantle the regulator. | British Gas and other members of the big six have repeatedly warned that the lights could go out – most vociferously when Ed Miliband told the party annual conference last autumn that an incoming Labour government would force companies to freeze prices, break up the big six and dismantle the regulator. |
| This stance was undermined on Wednesday when SSE, Britain's second-biggest provider, said it would not increase prices for its five million customers until 2016 and has already split off its wholesale arm, which includes energy production and storage, from the retail business, which sells to homes and businesses. | |
| Ofgem said there were "continuing uncertainties" about whether having retail and wholesale businesses under one roof was in customers' best interests. | Ofgem said there were "continuing uncertainties" about whether having retail and wholesale businesses under one roof was in customers' best interests. |
| Richard Lloyd, executive director of the consumer group Which?, which had led the way in pushing for a full inquiry, said: "This investigation must work quickly to expose what is really happening in the energy market and confirm where competition is lacking. It is make-or-break time for the energy suppliers, who should not wait to be forced into action but instead start now to put customers first, keep costs as low as possible and trade transparently." | Richard Lloyd, executive director of the consumer group Which?, which had led the way in pushing for a full inquiry, said: "This investigation must work quickly to expose what is really happening in the energy market and confirm where competition is lacking. It is make-or-break time for the energy suppliers, who should not wait to be forced into action but instead start now to put customers first, keep costs as low as possible and trade transparently." |
| Ofgem's request to the CMA is subject to a two-month consultation period to let the industry and interested groups have their say. The City had long-anticipated an inquiry, SSE shares dropped 2.3% to £14.82p, while Centrica's were marginally higher at 324.9p at 1.30pm UK time. | Ofgem's request to the CMA is subject to a two-month consultation period to let the industry and interested groups have their say. The City had long-anticipated an inquiry, SSE shares dropped 2.3% to £14.82p, while Centrica's were marginally higher at 324.9p at 1.30pm UK time. |