Britain orders anti-trust probe into energy suppliers

LONDON Thu Mar 27, 2014 2:42pm GMT

1 of 2. Electricity pylons are seen near Dalwhinnie, Scotland March 27, 2014.

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LONDON (Reuters) - Britain ordered an anti-trust investigation into energy suppliers after finding signs of tacit price coordination, launching a process that could result in the break-up of some of the biggest players including Centrica.

Ushering in what could be the biggest shake-up of Britain's retail energy market since it was opened up 15 years ago, three regulators said competition was now so weak and public trust so low that a full investigation was required.

A final decision on the fate of the big six energy suppliers is likely to be two years away. Bosses and some politicians warned the resulting uncertainty could delay up to $330 billion of investment the government says is needed to prevent the lights from going out.

"We now have a clear recognition of market failure in the energy industry," Tim Yeo, chairman of Britain's parliamentary committee on energy, told Reuters on Thursday.

Yeo, a lawmaker in Prime Minister David Cameron's party, urged the government to act swiftly to break up the energy companies instead of waiting for a lengthy review.

"Uncertainty is the one killer for investment," he said.

Centrica Finance Director Nick Luff said the firm would "act on that uncertainty and that's something the company and the country will have to deal with."

The country's big six suppliers - SSE, Scottish Power, Centrica, RWE npower, E.ON and EDF Energy - are under intense political scrutiny ahead of a national election next year because of soaring utility bills.

The companies, which control around 95 percent of Britain's energy supply to households and businesses, have denied accusations by the opposition Labour party that they are ripping off customers.

The regulators said they had found some signs of tacit coordination by the companies on pricing strategies, though they said there was no sign of explicit collusion. Shares in Centrica were trading 0.4 percent higher and shares in SSE were down 2.4 percent at 1427 GMT.

POLITICAL ENERGY

The soaring cost of items from gas to train tickets has shot up the political agenda since the return of economic growth forced the opposition Labour party to shift its line of attack to the decline in real incomes that has squeezed voters.

Labour leader Ed Miliband pledged last September to freeze bills for 20 months if he won the 2015 election, prompting Prime Minister Cameron to order a review in October.

"Profit increases and recent price rises have intensified public distrust of suppliers and highlight the need for a market investigation to clear the air," energy regulator Ofgem said after the results of that review were published on Thursday.

In total, retail profits within the sector rose to 1.1 billion pounds ($1.8 billion) from 233 million pounds between 2009 and 2012, the regulators said.

"The launch of a full-blown market investigation is confirmation that the energy market is broken," Labour's shadow energy minister Caroline Flint told parliament.

The big six energy groups argue that Britons' energy costs are lower than in many other European countries, where the market is generally dominated by one or two big players.

Government figures published on Thursday showed UK domestic gas and electricity prices were the lowest and fifth lowest last year among the EU's 15 oldest member nations and average unit costs for energy are also comparatively low.

But biting winters, badly insulated houses and inefficient heaters drive up costs to British consumers.

A Reuters analysis of company data showed hundreds of thousands of customers have started switching to smaller providers in search of better deals. One of those to benefit is Ovo Energy.

"It is likely we will see a much more dramatic shake-up of the sector now and that can only be good news for energy customers and the industry as a whole," said Stephen Fitzpatrick, chief executive of the small supplier.

A public consultation will run for eight weeks until the end of May before the regulators make their final decision to refer the sector for investigation.

The competition watchdog has 18 months to carry out the investigation and can request a six-month extension if needed, pushing the outcome of the investigation well beyond next year's May election.

(Additional reporting by Geert de Clercq in Paris; Editing by Guy Faulconbridge and Erica Billingham)

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Comments (2)
laodizea wrote:
Japanese Fukushima is coming

Mar 27, 2014 2:10pm GMT  --  Report as abuse
GlobalFamily21 wrote:
Just a mockery that is what I would like to call after the parliamentary committee questioned the executives of 6 major energy companies and the report given by Ofgem. After the parliamentary enquiry under the leadership of Ofgem, they told the public that the companies are correct in increasing the prices.

I remember some report ‘energy companies are making 700% profits and again they are coming up with 300% increase in prices’. BBC also brings up the executives and broadcast their fake arguments in the light of 50 years forecast. Let the BBC come up with the ordinary people, collect their opinion and their real life experience than supporting the fraudsters.
Now SSE has come up with a good idea and seems like a good relief to the customers that other companies have to follow. But now the Ofgem is saving other companies in the light of the fake enquiry for two years. It is really fake and Ofgem is against the customers and with the exploiting companies. Ordinary people do not understand the real hidden meaning of the action and think that government has taken a favourable decision. No not at all. Let the companies compete each other so that customers may be benefited out of the market play.

Mar 27, 2014 9:14pm GMT  --  Report as abuse
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