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Thursday, March 27, 2014

Ofgem Calls for Energy Investigation

Ofgem has stated that energy companies may be making excess profits and ripping off loyal customers. As such it has called for a full Competition and Markets Authority investigation that could result in the break-up of the Big Six (British Gas, SSE, Npower, EDF, Scottish Power and E. ON which control 95% of Britain's energy supply market).

Ofgem said that energy retail profits of Britain’s six largest energy suppliers had risen from £233M in 2009 to £1.1BN in 2012 “with no clear evidence of suppliers becoming more efficient in reducing their own costs”.

The Telegraph quotes Ofgem:
Further evidence would be required to determine whether firms have had the opportunity to earn excess profits.” 
Ofgem also said that suppliers were “consistently setting higher prices for consumers who have not switched”, who are often the most vulnerable and least engaged customers, while offering cheaper deals to savvy consumers.

It found evidence of "possible tacit coordination reflected in the timing and size of price announcements", which "reduces competition and worsens outcomes for consumers" although it is not a breach of competition law.

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."
An investigation is likely to begin in June and to last at least 18 months, potentially two years.In other words the long suffering consumer will have to endure at least two more years of high prices and lack of transparency.

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