The pricing policies and tactics of the UK’s big six energy companies could once again fall under the spotlight as part of a definitive investigation into the energy market.
Energy regulator Ofgem has asked the Competition and Markets Authority (CMA) to investigate the market so it can consider “once and for all whether there are further barriers to effective competition”.
The referral comes hot on the heels of the newly published State of the Market assessment, which reveals that retail profits of the UK’s largest energy companies increased from £233m in 2009 to £1.1bn in 2012 - with no clear evidence of suppliers becoming more efficient in reducing their own costs.
The report, which was prepared jointly with the Office of Fair Trading (OFT) and CMA, also shows evidence of suppliers “consistently setting higher prices for consumers who had not switched”. Consumer confidence was also dwindling, with 43% now distrusting energy companies to be open and transparent.
The Association of Convenience Stores (ACS) welcomed the proposed investigation.
Research conducted by ACS has shown that 36% of retailers believe that they have been overcharged by their energy supplier, while 23% have reported difficulty in switching their contract or supplier.
ACS chief executive James Lowman said: “This investigation is long overdue. There are clear issues in the energy market which act as a barrier for our members, both in terms of trust and engagement with suppliers. The business marketplace is often seen as more competitive, but within the convenience sector there are still a significant majority of stores that are supplied by the big six energy companies and it is important that the proposed investigation considers improving competition both for domestic customers and small businesses.
“We will be playing a full part in the market investigation, ensuring that the difficulties faced by convenience stores and other small businesses when dealing with energy companies are taken into account.”
Ofgem must now consult with stakeholders before making a final decision on a referral to the CMA for investigation.
The news comes a day after big six supplier SSE announced it was freezing prices until January 2016. Together with Scottish Power, Centrica, RWE Npower, Eon and EDF Energy, the big six account for about 95% of the UK’s energy supply market.