Ofgem refers energy market for full competition investigation

26th Jun 2014 12:02

Ofgem is to refer the energy market for a full competition investigation, the regulator announced on Thursday, in a move to "rebuild consumer trust and provide confidence for investors".Following the proposal made in March, the Competition and Markets Authority (CMA) is now being tasked to "ensure, once and for all, that competition works effectively for consumers".Ofgem said the investigation will look at the relationships between the supply businesses and generation arms of the Big Six energy suppliers, as well as their profitability. It expects the CMA to also look at whether there is sufficient competition between the large suppliers, and investigate barriers to entry and expansion.The Big Six comprise of Centrica-owned British Gas, Npower, SSE, Scottish Power, E.On and EDF (division of French group EDF Energy).A recent assessment by Ofgem, the Officer of Fair Trading (OFT) and CMA, showed that competition in the current market is now working as well as it should for consumers."It showed increasing distrust of energy suppliers, uncertainty about the relationship between the supply businesses and the generation arms of the six largest suppliers, and rising profits with no clear evidence of suppliers reducing their own costs or becoming better at meeting customer expectations."Dermot Nolan, Ofgem's Chief Executive, said there was "near-unanimous support" for the referral and that an investigation should "clear the air"."The energy market is also going to change rapidly over the next few years with the roll-out of smart meters, the government's electricity market reforms, and closer integration with European energy markets. A CMA investigation should ensure there are no barriers to stop effective competition bearing down on prices and delivering the benefits of these changes to consumers," he said.BC