Robin Pagnamenta, Energy and Environment Editor
We've made some changes
to The Sunday Times
British consumers are being ripped off by a “comfortable oligopoly” of bloated electricity and gas supply companies, MPs were told yesterday.
At the opening of a parliamentary hearing into competition in the UK power market, Allan Asher, the chief executive of Energywatch, the consumer watchdog, launched a two-hour tirade against the industry’s leading players. He accused Britain’s big six energy suppliers of engaging in “tacit collusion”, said that competition in the market was a “myth” and that consumers were “getting it in the neck” from companies with no incentive to compete or innovate in order to win business.
“Sadly, we have seen the 20 suppliers of ten years ago shrink into just six,” Mr Asher told a cross-party group of MPs on the Business and Enterprise Select Committee. “Consumers are the losers.” While he acknowledged that there was no evidence of outright price-fixing, Mr Asher claimed that the largest suppliers followed British Gas, the dominant market player with 16 million customers, in raising or lowering prices.
“In oligopoly markets, you don’t need to meet in smoke-filled rooms,” he said, citing figures showing that for dual fuel paid for by direct debit, the most popular product in the industry, the annual price difference between the six main UK energy companies — E.ON, British Gas, SSE, ScottishPower, nPower and EDF — was less than £30, or “just a few pence a week”. He said: “There is a myth that there is vigorous price competition between them.”
The warning comes amid fears that the industry will increase prices again this summer. Energy companies have blamed rising wholesale prices for a succession of rises in domestic charges this year, which have taken the average annual dual fuel bill to £1,048, up from £662 in 2005. Global oil prices reached a record of almost $130 yesterday.
Mr Asher’s comments unleashed a storm of protest from the industry. A spokesman for Centrica, the owner of British Gas, said that he was “misleading” consumers. “Despite the impact of record oil prices on the cost of gas internationally, Britain’s household gas bills remain the lowest in Western Europe, and our electricity is among the cheapest, too,” he said.
Mr Asher rejected the argument that the level of switching — five million last year — offered a guide to the level of competition in the industry. He said that 4.8 million customers, many of whom were among Britain’s poorest people, were “closed out” of the switching market because they use pre-payment meters. Customers could not switch if they had no bank account, no internet access or problems with debts.
He said that the possible sale of British Energy, the UK’s biggest electricity generator, to EDF, of France, would compound the problem of a lack of industry competition. The top six suppliers control 55 per cent of the generating market, which would rise to 75 per cent if the EDF deal proceeded.
Winter gas prices hit a record high of 89.1p per therm yesterday, and winter 2008 power prices rose to £78.85 per megawatt hour, because of rising costs for power stations.
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Those calling for renationalisation seem to be forgetting that there is no money in the coffers to do it. Seizing ownership of these companies, Chavez-style, would only lead to retaliatory action against British companies in those countries. Anyone fancy another war with Germany, France and Spain?
Paul, Coventry,
A windfall tax would be a good idea
Richard, Bexhill, UK
I like the comments of David Thijim of Stourbridge but it won't happen. There could be a windfall tax but it will go to reduce government debt. Prudence is something which this government has chosen to forget. We will only know the true state of our economy when this government is out.
Noel Dobson, York, UK
RE Nationalisation and the railways too!
MR W Jones, Liverpool, England
Direct Debit is a licence for these utility companies to raid your bank account. They put you in credit with them, they get YOUR interest. I have been paying monthly for two years and give them no more than they require.
Water is the best, I can leave my tap on all day and pay no more (no meter).
Dave Kinsley, Derby, UK
How much of the fall of the dollar over the past year affect the uk oil price increase.?
These utility costs + council tax should be included when calculating the CPi.
Then more people would demand higher wages.
making the government control Unfair costs more.
Is this not what economics is about
Peter Turner, Barnstaple, Devon
No-one is complaining about lack of competition in the retail petroleum industry where prices vary so little. As James says, I would expect little variation in prices for a basic commodity. If there were large differences, high cost suppliers would go out of business leading to redundancies.
Paul, Wimborne,
'Tacit Collusion'. That's the phrase I've been looking for to describe the activities of the high street banks. Many thanks.
Tony Jones, Grantham, Lincs
I like the comment that gas bill sin britain are apparently the cheapest in Europe. Last time I checked, Ukraine was in Europe, so was Russia and gas bills are definitely lower there. The solution whihc everyone seems to miss is to conserve energy - how else will you mitigate global warming?
John, Knutsford, UK
All credit to Mr Asher, but he is still understating the case. The fact is that, wherever you live, you can get gas from only one source: the pipe that enters your house. Having dozens of accounting organisations - each with its own expensive staff and facilities - does not alter that stark fact.
Tom Welsh, Basingstoke,
Power suppliers, railways, buses, telecomms... Any company with shareholders worries only about their shareholders and overpaid directors, not the customer. We are simply cash-cows for government as well as for businesses that lack the wit or will to boost profits through open competition.
Barry Lane, Eastbourne, UK
If those in government had both feet on the deck and both oars in the water, they would be amongst the first to learn of such things instead of the last. They would also have understood why the separate ownership caveat attached to the original Privatisation Bill, was not put there to be removed.
Richard Crow, Warsaw, Poland
Nationalisation would create a complete monopoly. Given this Government's track record on tax increases, and their need to borrow more, wouldn't this give them the opportunity to solve the problem by milking the middle classes even more?
Phil, London,
And this is a surprise?
Sarah, London,
Well, Mr Asher has an agenda - what to do when Energywatch disappears later this year. And here is a suggestion: if you really believe what you say, then why not set up your own company and supply energy more cheaply than anyone else. Professional whingers should get off the pot and act!
Stepan, Glasgow, Scotland
Wholesale electricity has risen 50% since the beginning of April 2008 - jus six weeks! So those prices are going to keep increasing I'm afraid...
Lauren, Oxford,
I would love to be supplied by British Gas as I was in my previous house. I now live in a flat in a large house in the country and our supply is LPG by Calor whose prices are drastic. For a 4 bed house I was paying £35 per month , now it is nearer £100 for a 2 bed flat.
Jim Aylward, Sevenoaks, UK
Gee I didn't see that coming. I thought the UK energy companies would be so proud to have the opportunity and responsibility to provide this great nation with its energy needs that they would go out of their way to be fair.
Miss Dee, Tayside, UK
You cannot have competition in a captive market only profiteering. When prices again double this year you will see even bigger profits declared next year. Utility profits should be capped by a windfall tax that is extremely harsh. The money should be returned to the consumer not the government.
David Thijm, Stourbridge, UK
Paul in Coventry is dead right - it is the separation of generation and supply that is key and that has failed - Ofgem are supposed to be doing a review but when I submitted this comment I was told it hadn't started!
Richard, Newton Abbot,
Every customer who is able should switch supplier every year just as a sign of protest at their lying and profiteering. Innundate them with paperwork.
David Thijm, Stourbridge, UK
The general public have always, and will always, be taken to the cleaners by the current crop of power suppliers but this slack government will not have the will, energy or pluck to change this situation by re-introducing a government/state run system; if they did it would cut-out the fat-cat profit
Derek Clifton, Andover, Hampshire, Merry England
welcome back to RIP-OFF Britain.
Lee CHav
Lee, Lancaster, England
Three words: Nationalisation, Nationalisation & Nationalisation. These 'cartels' need to be broken up immediately!
Noel McLaughlin, Chester,
When the Tories privatised the electricity industry they placed a caveat that generation and supply should be under separate ownership. When New Labour overturned that ten years ago, then consolidation was bound to happen, leading to the cartel that now exists today and which should be broken up.
Paul, Coventry,
Frankly I would not expect a huge range of prics for a basic commodity. The producers of power are in a competitive market and raw material costs have risen fast. It is the ususal political game of finding a scape goat for increased consumer costs. Get nuclear on the road!
James, LOndon, UK
People rant on about Gordon Brown selling gold for euros. The Tories sold our gas companies, electricity boards, water companies, council houses, BR, etc all in the name of creating a share/property-owning democracy. These shareholders sold out for a quick profit and we are all paying the price.
Val Daniels, Mijas Costa, Spain
When governments run essential services, like gas, electricity, trains and so on, it was considered a service to the public. Selling these things off to private companies, it becomes profit that matters above all else.We have seem that well and truly here in Victoria.
margie , victoria, australia
Since I moved to France six years ago, the price of my electricity from monopoly supplier EDF has remained unchanged at 3.85p per unit off-peak and 6.3p per unit full-rate - putting UK power prices around 2.5 times those of France.
Denis, Bordeaux, France
You are not alone. Whether it is your liberalised market or the Us's deregulated market, the systems are flawed and have not delivered the intended competition nor fair and reasonable rates for the individual consumer. In states that did not deregulate, rates are lower.
Ann Reed, Baltimore, United States
I have a small cottage I use maybe 5 days in the year. No one comes to read the meter but I have been give estimated readings and charged 250 pounds. I queried this and asked for a person to come and read the meter as I live abroad. Result in credit for 250 pounds!!! ALl because I pay by direct debt
fenny, norfolk,
So what else is new?
Andrew Milner, Karuizawa, Japan