Readers will be aware that the issue of energy prices has been the subject of much commentary and controversy lately, notwithstanding recent falls in average gas and electricity bills. The Competition & Markets Authority announced in July last year that it would launch a wide-ranging investigation into the energy market after a reference from the UK gas and electricity regulator, Ofgem, focussing particularly on the ‘Big Six’ energy companies – SSE, Scottish Power, Centrica (which owns British Gas), npower, E-On and EDF Energy. Yesterday, the CMA published its updated issues statement, which can be found here. Supporting papers are due to be published over the next few days.
Media coverage has largely focussed on the CMA’s statement that up to 95% of dual fuel consumers would have saved money on their energy bills between 2012 and 2014 had they switched tariffs or suppliers (see here, here, here and here). The CMA has noted that it is likely to be poorer than average or elderly households which are less likely to switch providers. The media has also covered the query raised by the CMA against the quality of customer service offered by the ‘Big Six’, with complaints rising fivefold between 2007 and 2013 (and more than doubling between 2013 and 2014).
The CMA does, however, say in its statement that it does not think that firms have been making excessive profits from the generation of electricity, or that the energy market as a whole lacks liquidity.
It also does not see an issue at this stage with the ‘Big Six’ being both energy generators and energy retailers. Unless this changes in its final report, it does not look likely that the CMA will recommend that energy companies separate their generation and distribution arms into separate companies.
The next stage of the CMA’s investigation will focus on whether the ‘Big Six’ have been too quick to raise energy prices when energy costs have increased, and too slow to lower when costs have decreased. It will also look into whether the ‘Big Six’ have made excessive profits from their energy retail arms.
Only a few months out from a General Election, the reaction from politicians has been predictably swift. The Energy Secretary, Ed Davey, has stated that he “would not flinch” from breaking up the big energy companies if recommended by the CMA (although the CMA is not suggesting such a step at this stage). It should be noted that the Energy Secretary was speaking in a party political capacity as a Liberal Democrat, rather than as a minister. In response the Labour Party has highlighted its pledge to freeze energy prices until 2017 and give Ofgem the power to force suppliers to cut prices.
The CMA has opened its consultation on the issues statement and supporting papers. Submissions should be made in writing by 5pm on Wednesday 18 March, either by e-mail to firstname.lastname@example.org or via post to:
Energy Market Investigation
Competition and Markets Authority
As always, if you want to discuss the report, please feel free to get in touch with your usual contact at Brodies.
On February 19, 2015