'Big Six' Energy Firms May Be Broken Up

Written By Unknown on Kamis, 27 Maret 2014 | 14.44

The energy watchdog has ordered a competition inquiry into the household supply market that could lead to the so-called 'big six' firms being broken up.

Ofgem charted a quadrupling in profits between 2009 and 2012 and said it was acting to "remove uncertainty" by referring the sector to a full investigation by the new Competition and Markets Authority (CMA).

Its State of the Market Assessment accused suppliers of "consistently setting higher prices for consumers who have not switched."

It found little evidence of households engaging in the market, with 43% distrusting firms to be open and transparent.

The review also reinforced concerns about excessive profits and barriers to entry for independent suppliers.

It found that retail profits soared from £233m in 2009 to £1.1bn in 2012.

Ofgem said there was clear evidence of suppliers becoming more efficient in reducing their own costs, although further evidence would be required to determine whether firms have had the opportunity to earn excess profits.

The market investigation, Ofgem said, would conclusively determine whether there should be more separation between the largest companies' supply businesses and generation arms, in a bid to provide more clarity on profits.

One of the 'big six, SSE, confirmed on Wednesday it was to legally separate its supply and generation businesses in a bid to improve transparency as it announced a price freeze until January 2016.

While Ofgem found no evidence of collusion on pricing, the review discovered "evidence of possible tacit coordination" in the timing and size of price announcements and new evidence that prices rise faster when costs rise than they reduce when costs fall."

Its chief executive Dermot Nolan 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.

"The CMA has powers, not available to Ofgem, to address any structural barriers that would undermine competition.

"Now consumers are protected by our simpler, clearer and fairer reforms, we think a market investigation is in their long-term interests."

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