Energy’s Big Six may be forced to break up

BRITAIN’S BIG Six energy companies could be forcibly broken up after the industry watchdog ordered a first full-scale competition probe into the sector.

Ofgem said soaring bills and intensifying public distrust highlighted the need for an investigation to determnine whether firms were profiteering after earning quadrupled to more than £1 billion in three years.

The watchdog said the probe by the Competitions and Markets Authority (CMA), which could take two years, would “clear the air” amid concerns that switching between suppliers had fallen and vulnerable customers were losing out.

The supply companies gave a mixed reaction to the probe.

Perth-based utility SSE said it believed the energy market was competitive and much had been done to make it more transparent from a consumer point of view.

It also pointed out that the major utilities had spent billions on infrastructure projects — cash that could be jeopardised under any restructuring — with its own investment topping £7bn in the last five years.

ScottishPower chief corporate officer Keith Anderson welcomed the probe and said he hoped it would lead to a more certain future for the UK energy sector.

British Gas owner Centrica said a probe “free from political interference” was welcome but warned that a prolonged investigation could create uncertainty and threaten billions of pounds of investment needed to keep the lights on.

Announcing its referral decision, Ofgem said retail profits in the sector had increased from £233 million in 2009 to £1.1bn in 2012, with consumer prices having risen by 24% over the period, significantly ahead of the rate of inflation of 13.8%.

Ofgem also announced it was increasing the level of penalties for energy suppliers found to have breached industry rules.

Chief executive Dermot Nolan said: “The CMA has powers, not available to Ofgem, to address any structural barriers that would undermine competition. Now consumers are protected by our simpler, clearer and fairer reforms, we think a market investigation is in their long-term interests.”

Energy Secretary Ed Davey backed the probe saying “This is just too important for people to rely on guesses about how to fix the energy markets. If we get it wrong, consumers will pay the price.”

Labour’s Caroline Flint said the announcement confirmed the market was broken and that a price freeze was needed.