The Courier & Advertiser (Perth and Perthshire Edition)
‘Big six’ profits probe urged
ENERGY SECRETARY Ed Davey has urged comp etition authorities to “think radically” as they consider whether to launch a full-scale investigation into the energy sup p ly market that could result in British Gas being broken up .
In a letter, Mr Davey p ointed out that gas sup p ly p rofit margins at some sup p liers were several times higher than margins on electricity.
Analysis alongside the letter suggested the former nationalised comp any may be benefiting from a “strong monop oly p osition”.
He told BBC Radio 4’s Today p rogramme that reducing the rate of earnings from gas to the level on electricity could save consumers nearly £40 a year.
The Cabinet minister’s fresh intervention in the energy debate knocked £600 million off the value of British Gas parent Centrica as shares fell by nearly 4% at one stage. Rival SSE fell as much as 2%.
Mr Davey was accused of sparking a “witch-hunt” against energy firms and of threatening jobs. The minister wrote to regulator Ofgem, which is investigating the market alongside other bodies.
He told Today: “I want them to think radically. It is an independent process. They could decide to take no action or they could decide to go for a full-scale market investigation.
“There could be a number of remedies if they go down that route, including the breaking up of some of these companies if they have been shown to abuse their market power.”
Figures accompanying his letter to Ofgem showed British Gas has 41% of the market share in gas, and generated a profit margin of 11.2% in 2012 on domestic supply.
The figures showed the average margin for gas supply across the so-called ‘big six’ suppliers — including SSE, E.ON, EDF, npower and Scottish Power as well as British Gas — was 6.7% in 2012.
SSE’s margin, at 11.4%, was higher than that of British Gas — though its market share, at 12%, was lower.
Margins on domestic electricity supply across the industry were an average 1.8%, according to the data.