Calls for competition investigation on energy prices

Consumer Focus is backing calls from concerned MPs for a Competition Commission investigation into whether the ‘big six' energy companies are failing to pass on wholesale energy price cuts to consumers.

The consumer champion is supporting an Early Day Motion being tabled today (Wednesday 25 Nov) by John Grogan MP and is writing to all MPs asking them to back the motion. Consumer Focus wants a thorough investigation into the workings of the whole energy market.

Consumer Focus has warned repeatedly that there is room for significant price cuts from energy companies, and has called on suppliers to lower their prices. The watchdog has frequently voiced its concerns that, because price cuts are not being fully passed on, consumers are not getting a fair deal. Wholesale prices continue to remain low, while retail prices stay high. Consumers are forced to suffer this situation because the energy market is all but bereft of real competitive pressures.

Robert Hammond, energy expert for Consumer Focus, said: ‘Millions of people are paying over the odds to heat their homes this winter, despite huge falls in the wholesale price of gas. A truly competitive market would ensure that when energy companies pay less to supply energy, customers pay less to receive it. Yet none of the big six energy companies are breaking ranks and passing on lower wholesale costs to their mainstream customers.

‘The energy market is broken and will not fix itself. The Competition Commission is the resource available to regulators and government for such a failed market. A detailed examination by competition experts is the way to identify the necessary remedies and the steps to implement them.'

Major problems with the energy market are limiting competition and making it impossible to ensure pricing is fair. Wholesale and domestic electricity supplies now largely come from different arms of the same companies. This leaves the sector dominated by a small number of players who can self-supply their own electricity, with a lack of transparency over this relationship. The limited volume of trading, particularly in electricity, also restricts competition and prevents new companies from entering the market.

These are deep-seated and complex issues of market structure. That is why Consumer Focus believes that Ofgem or the Secretary of State must refer the GB gas and electricity market to the Competition Commission in order to revive the competitive spirit in these markets.