Ofgem puts big six energy suppliers under investigation 

The energy watchdog, Ofgem, fired the starting gun on Thursday on the biggest investigation yet into the energy market by referring the much-criticised power industry to the Competition and Markets Authority (CMA).

The big six suppliers will be under the spotlight for the next 18 months as the CMA looks at whether SSE, British Gas and others have been profiteering and should be broken up.

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

A recent assessment of the sector by Ofgem alongside the Office of Fair Trading and CMA showed increasing distrust of energy suppliers, uncertainty about the relationship between the supply businesses and the generation arms of the six largest suppliers, plus rising profits with no clear evidence of suppliers reducing their own costs or becoming better at meeting customer expectations, he added.

“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.”

The investigation comes after mounting pressure from consumer groups and then politicians on the energy industry following a period of soaring bills but a continuing stream of fines and complaints for breach of operating licences or poor service.

Richard Lloyd, executive director of consumer group Which?, described the referral as a “watershed moment” for a broken energy market and for the 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.”

Caroline Flint, shadow energy and climate change secretary, said the referral underlined why her party was committed to breaking up the big six and freezing energy bills till 2017, should it win power in elections next year.

“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,” she added.

The share price of British Gas’s parent group Centrica, already hit by expectations of an inquiry, fell another half a per cent on the news but Energy UK, the lobby group for the industry, welcomed the inquiry as a chance to “clear the air”.

 

Source: theguardian

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