Concerns over ‘oligopoly’ cornering the market

LABOUR’S ENERGY spokesman Tom Greatrex has accused the big six of conducting secret backroom deals which shield the true extent of theire profits. The MP has been handed a key shadow net cabinet role by Ed Miliband, who announced he would freeze fuel bills if elected prime minister in 2015.

In an exclusive interview with The Courier, Mr Greatrex said the big six are an “oligopoly” that has cornered the market.

“They can do lots of things they’re only able to do because of their size and the dominance they have in the market,” he said.

“For example, because all of the big six generate power they can, and some do, sell it to themselves in secret bilateral trades.

“So, they will say their retail profit margin is around 3% but their generation profit margin is up to about 20%.

“What they can do is basically charge themselves a very high price so they can say our retail margin is only that amount but they’re making profit in the generation part of the business.

“You can deal with that by having open and transparent trading where all power is sold on to an open exchange which means there’s transparency about what the retailers are paying from the generators and it allows other smaller retailers to be part of that market and competition can take effect.”

Transparency is the aim of a package of reforms announced by the Labour Party late last year.

Mr Greatrex said: “We’ve set out what we think should be done, which is open trading, which is ring-fencing of the retail sector from the generators and supply, which is a new regulator.

“It needs to happen and the price freeze is the tool that enables us to get on and do those things while bringing some relief in the meantime.”

After Mr Miliband’s speech, ministers unveiled a scaleback of the Energy Company Obligation (Eco) scheme which will ultimately cut average energy bills by £50.

Mr Greatrex described the coalition’s announcement as “a diversion from the real issue” and suggested it is playing into the hands of the big six.

He said: “To suggest that moving parts of some of what’s added to bills through general taxation is therefore solving the problem, which is largely derived from a dysfunctional market and companies making significant profits in the generation side and hiding it in their retail operations, doesn’t solve that problem.

“It’s great for the energy companies because they can then say they’re not putting their prices up as much as they were.

“But actually the bit they’re more concerned about is the clarity and transparency we want to bring to the market, making it easier to challenge these companies.”

Labour MP Tom Greatrex.