British Gas may be split
Government chides sector on prices
LONDON: Former gas monopoly British Gas might be broken up to put a stop to excessive profit margins charged by Britain’s biggest gas supplier, Energy Secretary Ed Davey said yesterday, responding to an energy sector review by regulators. Soaring energy costs have become a big political issue in Britain since opposition Labor leader Ed Miliband said in September he would freeze consumers’ bills for 20 months if he wins power in the next national election in 2015.
“There is evidence that British Gas, the company with the largest share of the gas domestic supply market, has tended to charge one of the highest prices over the past 3 years, and has been on average the most profitable,” Davey said in a letter dated Feb. 9 to the head of Britain’s energy regulator Ofgem. Ofgem, the Office for Fair Trading and the Competition and Markets Authority are carrying out an investigation into competition in Britain’s energy retail market whose top six players are Centrica-owned British Gas, SSE, EDF , RWE npower, E.ON and Scottish Power.
Centrica shares fell 3 percent to 305 pence by 1127 GMT, having sunk as low as 302-1/2p, their lowest since June 2012. Analysts said gas supply margins cited by Davey were not new and have been in the public domain for several years.
“Margins in gas supply for both Centrica and SSE have been relatively high since 2009/10 with no particular push back from Ofgem,” Liberum Capital analysts said. “Mr Davey’s letter, no doubt intentionally, raises the political temperature once again around UK energy supply. It is very difficult for investors to price in political risk for UK utilities at this time,” they said.
Davey’s Department of Energy and Climate Change has analyzed figures from energy regulator Ofgem last year which show that gas profits at some of Britain’s biggest suppliers are more than 5 times higher than profits from electricity. The government started an annual energy market competition investigation last year to address consumer complaints over increasing energy bills.
The first report conclusions are due at the end of March. “We will be looking at all available evidence when producing this report, until we have completed it we will not comment further,” a spokesman for Ofgem said. A spokes- woman for British Gas said the company welcomed the annual investigation and that further discussions on the topic were scheduled to take place over the coming weeks. — Reuters