Big Six Energy Firms Face Gas Profits Probe
Energy Secretary Ed Davey has urged a competition watchdog to examine the profits being made by the Big Six energy companies through supplying gas.
He has written to Ofgem chief executive Andrew Wright to look into whether the margins, which in some cases are five times higher for gas than for supplying household electricity, should be the subject of a market probe.
If such an investigation found evidence of a monopoly "to the detriment of the consumer", it could result in a company being broken up.
He also suggested the regulator looked into whether the Big Six should adopt a different business model and how well British energy markets are linked to those in mainland Europe.
Mr Davey believes every household could save £40 a year if profit margins for gas were to come down to a similar level to those in the electricity market.
In his letter to Mr Wright, the Liberal Democrat singled out British Gas and claimed there was evidence the company, which has the greatest share of the domestic gas market, had tended "to charge one of the highest prices over the past three years, and has been on average the most profitable".
He wrote: "Clearly you will wish to consider whether this is prima facie evidence of an issue in the market and so whether it merits a market investigation reference with the whole gamut of potential remedies that could follow including a break up of any companies found to have monopoly power to the detriment of the consumer.
"Alternatively you may of course conclude that no action is needed or potentially some intermediate measure which can be taken by the sector regulator."
British Gas said the data referred to in the Secretary of State's letter had been in the public domain for months.
A spokeswoman said it was complying with an ongoing independent market assessment by the Office of Fair Trading (OFT), Ofgem and the Competition & Markets Authority (CMA).
"Further discussions have been arranged over the coming weeks in which we will fully participate," she added.
Which? Executive director, Richard Lloyd described Mr Davey's intervention as "hugely significant".
Mr Lloyd said it implied the minister agreed with Which? that the structure of the biggest energy companies was partly to blame for the price hikes that millions of squeezed customers have been struggling with in recent years.
"The pressure is now on the regulators to announce next month that they are taking the first steps towards a more radical reform of the energy market, and to give consumers confidence that they are paying a fair price," he said.
Ofgem said in a statement it was currently working with the Competition Market Authority and Office of Fair Trading on an independent annual report looking at the state of competition in the energy market.
"We will be looking at all available evidence when producing this report, until we have completed it we will not comment further," it added.
Shadow energy and climate change minister Jonathan Reynolds said: "Actions speak louder than words - and this Government has let the energy companies get away with increasing their profits on the back of spiralling bills for hard-pressed consumers," he said.
"If the Government wants to be taken seriously on energy bills, nothing less than a price freeze and action to stop these firms from overcharging in the future, as Labour has proposed, will do."
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