DODGY power companies are to be investigated in an attempt to rebuild public trust in market competition, the energy regulator announced yesterday.
Ofgem said soaring household bills and intensifying public distrust highlighted the need for an investigation after profits at the Big Six energy firms quadrupled to more than £1 billion in three years.
It added that the Competition and Markets Authority (CMA) probe should ensure “once and for all” that competition works effectively — a task many say is impossible.
Campaign for Public Ownership director Neil Clark slammed the move as toothless.
“Ofgem is part of the problem. It is only doing this to defend the system, without which it wouldn’t exist,” he said.
“A report will come out giving the companies a wrap on the knuckles and it will all continue to go round and round in circles. The underlying problem of private ownership is not being dealt with.”
The investigation, expected to take around 18 months, will look at the price fixing between the supply and generation arms of the Big Six energy firms, as well as profit margins and market entry barriers.
British Gas owner Centrica has previously threatened that the probe could create uncertainty and endanger electricity supply.
However TUC general secretary Frances O’Grady described the investigation as long overdue.
She said: “Energy companies have been ripping off customers for years. It’s about time the government stood up for consumers who are sick of seeing their rising bills being used to prop up bloated profits.”
Average retail profits for the big six increased from £233 million in 2009 to £1.1 billion in 2012, while profits for supply and generation rose from £3 billion to £3.7 billion in the same period.
This year alone electricity bills have increased by 5 per cent and gas bills by 6 per cent.
Shadow energy and climate change secretary Caroline Flint said: “The launch of a full market investigation is a clear admission that Britain’s energy market is broken.”
The CMA will begin its investigation immediately and is likely to publish final decisions by the end of 2015.