Pressure mounts on rip-off energy firms

Pressure mounts on rip-off energy firms 

21/01/2008
 
The Times

BRITAINS biggest electricity producer has attacked the countrys energy market as anti competitive, which has allowed the big six players to rip off consumers.

British Energy, which is not one of the big six supplying the residential market, wrote to the industry watchdog, Ofgem, calling for it to investigate the rising profits of the companies just four months before the latest inflation-busting price hikes. Evidence in its letter represents the most significant attack yet on the big six amid growing anger at ministers failure to act. The letter contradicts assurances given to ministers by Ofgem last week that the market is intensely competitive. The watchdog has rejected calls for the industry to be referred to the Competition Commission.

Last week, a Sunday Times/ YouGov poll found that more than eight out of 10 consumers believed they were being ripped off by the energy companies. Household bills have risen by about 80% in the past five years.

On Friday, British Gas raised household gas and electricity bills by 15%, increasing the average dual fuel bill to more than 1,000. The announcement came after similar rises from Npower and EDF Energy.

An analysis obtained by The Sunday Times has found that Npower now makes profits of as much as 250 on household energy bills of about 1,000. In its letter sent last September, British Energy - which does not sell to residential customers - says the access of the big six to their own power stations and gas supplies undermines competition by restricting energy sales on the open market.

British Energy, which operates eight nuclear power stations, does not believe the companies are acting illegally, but says their control over energy trading increasingly forecloses the market to new entrants. It goes on to argue that the companies dual position means they can potentially manipulate prices and move profit margins where they want, from their generation businesses to customer bills.

In addition, they are not always paying the energy prices seen on the open market because they supply themselves. One senior industry source said: To say that volatility in the wholesale market drives straight through to customer prices is a fallacy [because] they are supplying from their own generational portfolio. The big six have got most of the generation and supply between them and its in all their interests to implicitly collude. The financial institutions don't look at this as a healthy market. British Energys letter also cites an independent report by Stephen Davies, an academic adviser to the Office of Fair Trading, which says Ofgem is misguided and misinformed in claiming the fact that millions of householders switch energy suppliers is compelling evidence of a competitive market. Davies's report says there are sufficient doubts about competition in the market to merit a Competition Commission inquiry. British Energy says Davies's concerns must be addressed and is calling for the profits on domestic bills to be published.