Energy firms face competition probe

27 June 2014

The UK's energy market will face a full investigation into its practices after regulator Ofgem formally referred it to the Competition and Markets Authority (CMA).

In yet another blow to the energy industry, the probe, which will take around 18 months to complete, will ensure "once and for all" that the market is working effectively and providing a fair deal for customers and help return confidence to the much-criticised sector.

Now that a three-month consultation as to whether the industry should indeed be referred to the CMA has concluded, the competition watchdog will now closely scrutinise the conduct of Big Six.

It will look at the firms' profits, whether there is a lack of competition between the sector's largest companies, barriers to entering the market, and investigate concerns over the relationship that allows the businesses to be both energy generators and suppliers to households.

Ofgem said a recent assessment of the market showed that it isn't working in the best interest of customers. There was an increasing distrust of energy suppliers and growing concerns over rising profits while their was no clear evidence of suppliers reducing their own costs, or becoming better at meeting customer expectations.

Compare energy prices and switch provider


Dermot Nolan, Ofgem Chief Executive, said: "Now is the right time to refer the energy market to the CMA for the benefit of consumers. There is near-unanimous support for a referral and the CMA investigation offers an important opportunity to clear the air. This will help rebuild consumer trust and confidence in the energy market as well as provide the certainty investors have called for."

He added: "The energy market is also going to change rapidly over the next few years with the roll-out of smart meters, the government's electricity market reforms, and closer integration with European energy markets. A CMA investigation should ensure there are no barriers to stop effective competition bearing down on prices and delivering the benefits of these changes to consumers."

The news has been welcomed by industry experts. Which? executive director said "radical reforms" were needed to fix the problems with the industry.

He said: "This is a watershed moment for the broken energy market and millions of people struggling to cope with spiralling bills.

"The investigation must leave no stone unturned in establishing the truth behind energy prices, and while it takes place Ofgem must continue its renewed, tougher approach to protecting consumers. Energy companies must also not wait for the outcome of this inquiry but make urgent changes now to do better by their customers."

Failing customers

Mark Todd, co-founder of independent price comparison site,, added: "The UK energy market is failing customers. Customers who do not switch are often being exploited for huge profit margins as there is no price cap in the market so suppliers can basically charge them whatever they like.

"Many of these people are fearful of switching and this is what the big incumbent suppliers then can profit from by charging them over the odds as they are so unlikely to move.
"The energy market in the UK has served up year after year of price rises, with some terrible customer service and escalating profits. When only the energy bosses appear to be getting a good deal from the market, it is no wonder that customer confidence has collapsed."

Energy UK, the industry's trade body, also welcomed the move. Chief executive Angela Knight said: "The competition inquiry will allow us to put to bed the toxic debate and shine a light on the progress the industry has already made.

"There are now more companies than ever in the market, switching is on the up especially to smaller suppliers and the industry is making it easier than ever for customers to engage with their company."

Add new comment