Big Six energy companies being threatened by Ofgem again
Ofgem are, once again, going after the energy companies, saying that they're making excess profits and pulling a fast one and ripping off customers. However, Ofgem haven't troubled The Big Six much, so this time, they're tagteaming with the Competition and Markets Authority who have been asked to launch a full investigation.
The aim is to threaten The Big Six with the fact that there's a very real chance they could be broken up.
Ofgem pointed out that retail profits from the UK's largest six energy suppliers had gone from £233m in 2009 to £1.1bn in 2012 "with no clear evidence of suppliers becoming more efficient in reducing their own costs". They continued: "Further evidence would be required to determine whether firms have had the opportunity to earn excess profits."
The regulator also found "new evidence that prices rise faster when costs rise than they reduce when costs fall" and that suppliers were “consistently setting higher prices for consumers who have not switched” and that there us evidence of "possible tacit coordination reflected in the timing and size of price announcements", which "reduces competition and worsens outcomes for consumers".
Dermot Nolan, Ofgem chief executive, 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."
So what do the businesses think about it all? As ever, they're firing threats back at everyone. Centrica warned that even by being investigated, it could result in blackouts because it would mean less investments in new power plants.
Ofgem aren't phased: "Given these problems Ofgem believes a referral to the CMA is timely and necessary because CMA’s more extensive powers can address any long-term structural barriers to competition. A market investigation would conclusively determine whether vertical integration is in consumers’ interests or whether there should be more separation between the largest companies’ supply businesses and generation arms."
Hands up if you think this is going to result in anything good for the customer.