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Gas and Electricity Market Under the Microscope

Energy regulator Ofgem today (Thursday) has launched an investigation into the markets in gas and electricity for households and small businesses.

Ofgem chief executive Alistair Buchanan said: “The decision to conduct the probe is in response to public concern about whether the market is working effectively. We are concerned about the increased volatility of wholesale prices and we want to investigate how European and other global energy market developments are affecting energy bills in Britain.

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“We, of course, keep the market under constant surveillance but to date we have seen no clear evidence that the market is failing.

“Nevertheless, recent events in the market have increased public concern and have damaged customers’ confidence that competition is working well and giving them a good deal. Customer confidence is vital for a well-functioning market. So we shall replace our magnifying glass with a microscope and take a more detailed look at the retail market and the influence of global wholesale market developments.

“The detailed probe we are now launching will investigate whether the market is working well for all energy customers – and not just particular groups such as those who are on the cheapest online deals. Customers certainly should not stop switching as there are still big savings to be made by changing your price plan, your supplier and the way you pay.”

The probe will be carried out under Ofgem’s Enterprise Act powers which will give the regulator access to detailed information that is not routinely made available. The European Commission has pledged to collaborate with Ofgem in the probe to ensure the British regulator is fully informed on other European energy markets.

In January Ofgem responded to allegations in the press of price fixing by suppliers with assurances that the regulator has seen no evidence of such activity and that remains the case. Now, as then, Ofgem urges anyone with evidence of anticompetitive behaviour by the energy suppliers to come forward with it.

Should the regulator’s findings lead to the need for further action, Ofgem can draw on a range of powers. These include powers under company licences, the Competition Act, or referral of the whole market to the Competition Commission. Initial findings from the probe will be published before the end of September - ahead of next winter.

Ofgem is already looking at tariffs for prepayment customers and those who do not pay their energy bill by direct debit. Ofgem will update its findings at a Fuel Poverty Summit in April, chaired by Ofgem chairman Sir John Mogg. Participants will include the Secretary of State for Environment, Food and Rural Affairs, Hilary Benn and the Energy Minister, Malcolm Wicks. The summit will consider other key issues of concern in tackling fuel poverty.

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