Energy probe decision 'imminent'

A full-scale competition probe into the energy market could be announced as soon as next week, potentially leading to the break-up of the Big Six firms.

A decision by Ofgem on whether to ask the Competition Market Authority to investigate the Big Six is understood to be imminent
A decision by Ofgem on whether to ask the Competition Market Authority to investigate the Big Six is understood to be imminent

A decision by energy regulator Ofgem on whether to ask the Competition Market Authority (CMA) to investigate is understood to be imminent, and The Guardian reported that it would result in the biggest-ever investigation into the sector being launched.

Ofgem announced its intention to refer the market to the competition watchdog in March, but the final decision depends on responses to a consultation which closed at the end of May.

The CMA has extensive powers to shake up the sector by removing ''long-term structural barriers to competition'' which could include separating firms' generation arms from retail divisions selling gas and electricity to homes and businesses.

Ofgem believes a full-scale probe by the CMA would ''clear the air'' amid concerns that switching between suppliers had fallen and that those who never switched, many of them vulnerable customers, were being ripped off.

In March the regulator s aid soaring household bills and intensifying public distrust highlighted the need for an investigation which will determine whether the companies are making excess profits - after they quadrupled to more than £1 billion in three years.

It also said it had found evidence of ''possible tacit co-ordination'' between companies on the timing and size of price announcements but stopped short of accusing them of explicitly colluding in an illegal cartel arrangement.

Scrutiny has focused on the so-called Big Six - Centrica, SSE, E.ON, npower, RWE and EDF - which control 95% of the gas and electricity market in the UK.

Shadow energy and climate change secretary Caroline Flint told The Guardian she welcomed the additional resources and support the CMA could provide to establish why overcharging, mis-selling and poor customer service had been allowed to go on for so long.

"Just in the last week we've learnt that wholesale prices have fallen substantially this year and yet consumers have seen no reduction to their bills," she said. "This investigation must address problems like this and stop them happening again in the future.

"However, it shouldn't paralyse politicians from taking action now to improve the lack of competition and weak regulation in the energy market, which has resulted in customers getting a poor deal."

A CMA investigation would take around 18 months, and concerns have been raised in the industry that a probe could create uncertainty and deter investment.

An Ofgem spokesman said the consultation had closed and the regulator was "now in the process of putting those responses together and making a final decision".

A Department of Energy and Climate Change spokesman said: "It is this Government that is taking tough action to drive the competition that has seen people switching supplier in record numbers, simpler tariffs and bills, getting energy companies to give back direct debit balances, taking £50 off the average bill and making switching faster and easier than it's ever been.

"This is just too important for people to rely on guesses about how to fix the energy markets so we asked Ofgem to work with the Office of Fair Trading and the new Competition and Market Authority to carry out an assessment to make sure the market is working for its customers.

"The final decision is a matter for Ofgem, Office of Fair Trading and the Competition and Market Authority acting independently."

Richard Lloyd, the executive director of Which? said: "With almost daily reports of poor performance by energy suppliers and falling wholesale prices still failing to be reflected in consumers' bills, a full competition inquiry is the right way to have an authoritative, independent review into how the energy market fails to work in the interest of consumers.

"If an inquiry is to genuinely help to rebuild consumer trust and inject more competition into the market, we need to see substantial proposals that will fix the Big Six. Suppliers that want to do the right thing shouldn't wait for the outcome of the competition authority's work to change their ways."