Power companies are ripping off consumers

“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

Source: Times Online - Robin Pagnamenta, Energy and Environment