Big Six could be broken up

Published by Rob Goodman on 10 February 2014.
Last updated on 10 February 2014

Hob and coin

The Big Six energy firms should be investigated over their gas profits, energy secretary Ed Davey has said.

Davey has asked regulator Ofgem to look into the margins made by the firms and consider breaking up companies who are found to be ripping-off customers.

In the letter, the Liberal Democrat MP said while most of the public debate about energy prices had been concerning electricity, two-thirds of most consumers' bills were taken up with paying for their gas and that British Gas has tended to charge one of the highest prices over the past three years.

If the margins were more in-line with the cost of electricity then households would on average be making a saving of £40 a year, the letter goes on.

"Clearly you will wish to consider whether this is prima facie evidence of an issue in the market and so whether it merits a market investigation reference with the whole gamut of potential remedies that could follow, including a break-up of any companies found to have monopoly power to the detriment of the consumer," it reads.

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Criticism

The Big Six have all received criticism in recent months following across-the-board price hikes, which were announced before Christmas.

An independent review into the market is currently being carried out by Ofgem, the Office of Fair Trading and the Competition and Market Authority and due to report by the end of March.

Mark Todd, director of independent price comparison site Energyhelpline, said:

"The recent news really doesn't look good for British Gas and SSE. They probably need to offer a price cut on gas otherwise their future could look very dark indeed. Quite clearly this is the very worst time to be a gas customer. For the last four years prices have risen by 40% and over the last 12 years prices have trebled."

Meanwhile, a spokeswoman for British Gas said the company welcomed the review and have fully complied with the regulators' investigations.

"Further discussions have been arranged over the coming weeks in which we will fully participate," she said.

"The data referred to in the Secretary of State's letter has already been fully disclosed and in the public domain for a number of months."

Todd reminded energy customers that the only way to get a better deal, is to shop around. "A customer can change their own situation in just five to ten minutes by switching. Most people who switch using an independent price comparison service are surprised by how easy it is and how much they save," he said.

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