Ofgem set to investigate energy price increases
By Laura Elahi on November 29, 2010
Energy sector watchdog Ofgem has announced that it plans to investigate the recent energy price increases imposed by various energy suppliers in Britain. Ofgem has claimed that the increases have widened the suppliers’ profit margins, from around £65 per customer in September to £90 per customer now – a rise of 38 per cent.
Three of the leading energy suppliers in the UK – British Gas, Scottish Power and Scottish and Southern Energy – have increased gas and electricity tariffs over recent weeks. Scottish Power imposed an 8.9 per cent electricity increase and a 2 per cent gas price rise. Scottish and Southern Energy announced that it would increase domestic gas prices by 9.4 per cent from the beginning of December, whilst British Gas is set to increase its gas and electricity tariffs by 7 per cent over the winter.
Amid growing fuel poverty and after a colder-than-average November, the fuel cost increases have angered many consumers and industry analysts, many of whom have argued that the increases are entirely unnecessary, unaffordable and unjustifiable. It would appear that Ofgem might agree with such views.
Ofgem Chief Executive, Alistair Buchanan, said: “The energy retail market can only be fully effective if consumers have confidence that the market is transparent and easy to take part in. So we will go beyond our usual quarterly reports on prices and do a comprehensive review of the retail market and our recent reforms from the consumers’ perspective. Greater transparency in the market is good for consumers, investors and for the energy industry as a whole.”
Adam Scorer, of Consumer Focus, has claimed that the Ofgem investigation will not be sufficient to change how the industry is operated. Mr Scorer said: “What the Ofgem review will not show is that the CEOs of the six major suppliers are huddling around a park bench with a calculator. They do not feel the hot breath of competition on their necks.”
Although the existence of an energy cartel in Britain is not inconceivable, Mr Scorer’s accusation implies that Britain’s leading energy companies are breaking the law by operating in an anti-competitive manner. Whether this is the case or not remains to be seen.