27 March 2014 / Home & Energy

It’s make or break time for energy suppliers

Richard Lloyd Executive Director

Comments 97

The results are in. The outcome of the long-awaited energy market assessment was released today and it’s good news for the 45,000 of you who backed our Fix the Big Six campaign. But we haven’t won yet…

Ofgem has decided that the energy market should be referred to a full scale competition inquiry.

The assessment found that retail profits increased sharply between 2009 and 2012 with little evidence of increasing efficiency from the suppliers.

It also expressed concern that the structure of the market means that it doesn’t work for the good of its customers.

We hope that this provides an opportunity to quickly address and resolve the underlying problems of a fundamentally broken energy market. We know that energy prices are consistently at the top of consumer concerns, and we know that levels of trust in the energy industry are at disastrously low levels – just one in five of you think your energy provider will act in your best interests.

A competitive energy market?

The inquiry has to take a long hard look at a structure that allows big energy companies to keep a stranglehold on vast swathes of the market.

The practice of buying and selling energy to themselves should be brought to an end and this can only be done by separating the supply and generation parts of their businesses, just as SSE committed to doing yesterday. This would add a level of transparency to the market and would provide a much greater degree of confidence that we’re being charged a fair price for the energy we use. Plus, SSE’s action proves that suppliers don’t have to wait to be forced to act – they can do so on their own right now.

Rebuilding trust in the energy market

The process of rebuilding trust in a market that has taken all of us for granted will take time, but this is a crucial first step. It’s good news that the regulators have listened to the tens of thousands of people who have supported our Fix the Big Six campaign. We now need the investigation to work quickly to expose what’s really happening in the energy market and confirm where competition is lacking.

We’ll be working hard to ensure your voice is being heard throughout the investigation, and we’ll continue to argue for radical reforms to ensure that the market works competitively for everyone – especially for the millions struggling with spiralling bills.

What do you think about today’s announcement? Is this the start of a journey towards an energy market that works in your best interest?

Comments

Richard Brinsden says:

30 March 2014

The big six is a price rigging cartel,always has been and always will be.One of them could halve their prices and take over all supplies,but it will never happen because it is a closed shop.

Ian says:

31 March 2014

Scrap standing charges altogether.
If I owned a Energy Company I would have only ONE SIMPLE TARRIFF for ELEC/GAS for everyone.
OAP’s during the Winter period no matter how long the cold spell – FREE.
How many of the big six would follow suit ?
Especially if I took away, a lot of customers, from them. Only then would they bring there prices down and offer similar schemes.
That’s COMPETITION not ONE puts up the prices and the others follow suit.
NO CUSTOMERS NO BUSINESS
They make MORE money from distribution, than from the customer. They don’t tell you that.
Are well I can but DREAM.
RE-NATIONALISE

Paul Hunt says:

31 March 2014

Politically, the proposed decision by Ofgem, supported by the CMA and the OFT, to refer the “supply and acquisition of energy in Great Britain” to the CMA is a ‘big deal’. It is intended to shoot the fox that the Labour leader set running with his commitment at his party’s conference last September, if elected, to impose a price freeze. It was not before tme for Labour to begin thinking about repairing the damage it had done over 13 years.

Gordon Brown’s windfall tax set in train a decade of asset sweating and flipping, equity extraction, high leverage, financial engineering, tax avoidance and the hollowing out of balance sheets that actually kept final electricity and gas prices low in real terms. The excessive national subsidisation of intermittent renewables that accompanied the onset of the Great Recession, combined with the shale gas boom in the US releasing supplies, and lowering the price, of internationally traded coal, with a large share of oil-indexed external gas supplies, and with the phase-out of Germany’s nuclear fleet, all hammered the balance sheets, share prices and market cap of the major European energy companies.

The reality is that final energy prices in Britain have only begun to catch up with excessively high prices in much of the rest of the EU as the big energy companies seek to repair their balance sheets. Four of the UK’s Big 6 are subsidiaries of four of the EU’s Big 7 and are doing their best to help their parents at the expense of consumers in Britain. SSE and Centrica are going along happily for the ride.

This proposed UK inquiry will achieve little, though a comprehensive inquiry by DG COMP might achieve something of substance. The solutions lie in a reduction in the excessive subidisation of intermittent renewables, the acceleration of approvals of US LNG export projects, the repair of the EU ETS, the development of a competitive EU market in gas transmission pipeline capacity, complete ownership separation of the currently vertically integrated wholesale and retail businesses, the re-establishment of currently captured energy regulators to ensure they strike a balance between the interests of investors and those of final consumers, the roll-out of smart meters to all final consumers, limited government guarantees during the construction and early operations phases of energy infrastructure projects and the restriction of subsequent ownership to genuine long-term, ‘rate’ investors.

The proposed inquiry is incapable not only of addressing the real underlying detriments, but of identifying and enforcing these remedies.

John says:

31 March 2014

All the above letters cover most of the subjects that the energy suppliers should put right I will add a question, How many members of the government are share holders in the Energy companies and would not support any change, as it will affect the bonus paid to them.

Sally Montgomery says:

27 April 2014

I would say too many, we have major problems not only with the cost of energy itself but also the standing charges and as for energy saving that’s a laugh with the poorest paying for the rich to get richer. When pensioners shiver under blankets in uninsulated homes while paying for private landlords and millionaires to reap the benefits something is very wrong

Jo says:

1 April 2014

I must be missing something but I CANNOT understand why the Labour Party are not promising to re-nationalise? They would walk the next election and Milliband would go down in history as a brave leader, doing the right thing for the people. I don`t believe it`s because they are associated with energy companies or have shares, as a so-called Socialist party they`d have too much to lose if found out whereas people just believe that of the Tories anyway.

Beryl says:

3 April 2014

Jo: I was tuned into the energy debate from The House of Commons this am and the question of Labour freezing energy prices was raised several times and the response was always that it would drive away competition [what competition?] and would lead to increased prices at the end of the period!

I don’t recall any questions regarding re nationalisation as I had to leave before it finished but if this went ahead I would imagine there would again be questions raised about competition keeping prices down and perhaps more importantly questions about increases in general taxation to pay for it which maybe wouldn’t go down very well in a pre election year. The aim was focused on the CMA to attempt to fix the broken market by re establishing competition and introducing more suppliers into it.

william says:

3 April 2014

With the wholesale price of Gas at a 30 month low, you’ve gotta love how some politicians are only talking about a freeze. I wonder when they’ll talk about a reduction. #theyhaventgotaclue

Ken says:

17 April 2014

Nationalisation solves nothing, except maybe to protect an inefficient industry – we need competition within a diversified industry producing energy in a variety of ways which does not make the UK hostage to Russian politics, US shale gas, Middle Eastern oil etc. That requires a government led energy strategy.

Ian says:

3 May 2014

What competition?
The UK is known as Treasure Island.
We are charged for goods and services what they dictate to us, because we don’t say NO, unlike other countries.
Funny, this week in the papers, the big FOUR Supermarkets are losing customers to Aldi and Lidl and they are now reducing there prices to get them back. If they can react quickly, why can’t the Energy Companies do the same.
Especially when wholesale Gas/Coal and Oil prices drop.
That is COMPETITION.
Before privatisation we all paid the same and the taxes paid for new Power Stations to meet the new demands, in this ever growing population, of ours
The majority of Energy companies who run and distribute the energy in the UK are foreign owned and they can hold the government to ransom, if they want to invest in new Power Stations or not, at a price.
We are the envy of the world, we have invented over 80% of technology what we take for granted over the years in one way or another.I agree that we need to look at alternative energy resources and not be, so dependent on other countries to supply Gas/Coal etc.
TECHNOLOGIES
RUBBISH – God knows how much we throw away
WAVE – We live on a ISLAND
SOLAR – It doesn’t need the Sun on it all the time
NUCLEAR – ?
These can ALL contribute to Heating and Lighting.
If these can reduce costs, we do not have to rely on other countries to supply and hold us to ransom.

Jo says:

3 April 2014

I didn`t hear the energy debate but exactly….what competition? We all KNOW they`re in it together (to coin a phrase!). I think people would be happier to pay more tax, a fair tax, than these haphazard very high energy price increases and railway fares also, if nationalisation of railways was promised. All the rest is messing about and not making any significant difference. As I said before if Milliband was BRAVE and focused I believe the marjority of people would respect it and support it….or at least enough to win the next election! He`s got to do something, with his lead reduced to 1 point now.

Ken says:

17 April 2014

It is essential that this inquiry looks at the generating subsidiaries to get to the root of energy pricing. However, for several years we’ve been told we are approaching an energy crisis so the timing of this this politically driven inquiry is worrying. If we are to believe the newspapers Ed Milliband single handedly stopped all capital investment in the energy industry with a single political statement. Who is responsible for ensuring we can keep the lights on at an affordable price, not just for retail consumers, but also for the high energy consuming industries that we need to keep in the UK if we are going to have a recovery in manufacturing providing import substitution if not exporting.

malcolm r says:

17 April 2014

The Government is responsible for ensuring that the energy companies see a benefit in investing in the UK – they are limited companies with shareholders and whether we like it or not they do not have to build new power stations here if they see an uncertain future. Irresponsible statements do not provide this confidence, particularly with an election in the offing. We need a long term energy policy on which all political parties agree – responsible politics rather than point scoring.

malcolm r says:

28 April 2014

Whilst I have my own views on charging for energy, my faith in Ofgem’s ability to work hard for consumers is not enhanced by this letter responding to the EU. https://www.ofgem.gov.uk/ofgem-publications/87427/ofgemsresponsetotheeuropeancommissionsretailmarketconsultation.pdf
It seems a wishy washy document missing simple, positive proposals. And some negativity – what is wrong with putting consumers’ previous usage on bills? Why wait for “more detailed data from smart meters” – years away for most of us. And why brag about the referral to the Competition and Markets Authority? It’s taken long enough to do that, and another couple of years before anything might result? What do these people do with their time – we need the energy market made clear and open sooner, not later. Or maybe it’s just the way European politics works. A pity we can’t take a lead and drive change through the EU.

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