Energy minister ‘would not flinch’ from breaking up big six if necessary to improve competition

18th February 2015

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The energy minister has said he would “not flinch” from breaking up the big six energy firms if an investigation into lack competition in the sector concludes it is necessary.

Dual-fuel customers have missed savings of up to £234 per year by not switching energy suppliers, initial findings from a competition inquiry reveal.

The Competition and Markets Authority (CMA) has published an update on its ongoing investigation into the energy market, which reveals that  from 2012 to 2014, more than 95% of dual-fuel customers of the big firms would have saved money by switching tariffs or suppliers, according to the BBC.

The savings missed ranged from £158 to £234 a year per customer.

The investigation by the CMA launched last July following a referral from Ofgem over the dominance of the big six energy firms.

SSE, Scottish Power, Centrica, RWE Npower, E.On and EDF Energy account for about 92% of the UK’s energy supply market and critics have accused the companies of using their might to raise prices quickly in response to increasing wholesale costs , but lower them too slowly when costs go down.

Energy Minister Ed Davey told the BBC Radio 4 Today programme: “If the evidence from the CMA is strong that the next step ought to be breaking up a company, if the Competition Markets Authority recommend that, certainly I as a Liberal Democrat, talking to the voters in the next election, will make it clear, we would not flinch from taking that tough action.”

The CMA findings have also highlighted poor service by the big six, as the number of complaints recorded against them rose fivefold between 2007 to 2013.

The report says:  “We note that increasing numbers of complaints may reflect: declining quality of service; price rises; changes in reporting standards; increasing media scrutiny of the sector; or a combination of these factors,” says the report.

The CMA also notes that millions of customers were inherited by the big suppliers following the privatisation of the energy industry in the 1990s. The report describes them as “less educated, less well-off, more likely to describe themselves as struggling financially, less likely to own their own home, less likely to have internet access, more likely to be disabled or a single parent”.

These “sticky” customers rarely consider switching and are missing out on big savings Between 40% and 50% of customers have been with a supplier for over a decade. For one supplier the figure is 70%.

The CMA is also considering whether or not profits in the sector are at an appropriate level

It has looked at the issue of energy firms owning both the power generation and supply side of business and has concluding there are no major issues here, nor that wholesale pricing is opaque.

 

 

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