26th Jun 2014 10:31
LONDON (Alliance News) - The UK energy market regulator Ofgem said Thursday that, following on from proposals in March, it is referring the UK energy market to the Competition and Markets Authority for a full investigation, asking it to investigate the barriers to competition inherent with the "big six" suppliers.
The regulator proposed the investigation in March, saying that the market needs a market investigation "to clear the air", with the investigation expected to reassure consumers and complement Ofgem's reforms for a simpler, clearer and fairer energy market.
Following a consultation period, the regulator has now formally referred the energy market to the CMA.
Ofgem's own recent assessment of the energy market, along with the Office of Fair Trading and the CMA, found that competition is not working for consumers in the UK, and that growing profits, coupled with price hikes, have intensified public distrust of suppliers
The regulator said that the CMA will begin its investigation immediately and is likely to publish final decisions by the end of 2015.
Ofgem added that it expects the CMA to look at the relationship between the supply business and generation arms of the six main suppliers, to study the barriers to entry and expansion for suppliers and the profitability of the "big six".
The Big Six energy firms are Centrica PLC owned British Gas, E.ON, EDF, Npower, ScottishPower and SSE PLC.
The decision to launch the CMA investigation follows months of speculation about the likelihood of an official industry-wide investigation.
Energy prices have become a contentious political issue of late, with bill increases toward the end of 2013 blamed on a combination of higher wholesale prices, rising costs for maintaining infrastructure, and the cost of the government's green energy taxes.
In December, UK Chancellor George Osborne announced that customers of the Big Six energy companies would see an average GBP50 reduction in their bills based on reductions in green and social levies.
Prime Minister David Cameron later announced a review of energy pricing and competition in the Commons, coupled with a pledge to cut green taxes next year.
Opposition leader Ed Miliband has said Labour will freeze energy prices for two years if elected to power in 2015, prompting energy companies to warn that they may not be able to fund investments and warnings from critics who say companies may raise prices even more ahead of any freeze.
Centrica shares were down 0.6% to 312.10 pence, while SSE shares were up 0.5% to 1,572.00 pence on Thursday.
By Tom McIvor; [email protected]; @TomMcIvor1
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