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Big 6 vs. Competition and Markets Authority

An alternative to the big fight between Froch and Groves, but you can bet this one is going to go more than 12 rounds.

Depending on to whom you talk to the UK energy market is either perfection personified or a corrupt cartel. We happen to believe neither is true.

However, the government, regulator and shadow cabinet are not so sure.

Such is the extent of this uncertainty that it is expected that a full competition commission enquiry will be launched this week into the behaviour of the Big 6 energy companies.

We have said before that there a lot of elements wrong within the energy industry and players are naturally able to take advantage of these inadequacies and exploit them for their own benefit. However we have also been at pains to point out that the businesses that supply energy to our homes and workplaces are not inherently evil. Inefficient, sometimes greedy, often unhelpful, but not evil.

But in the current climate it seems only a black or white opinion will suffice, no grey areas allowed.

Ofgem and the OFT are due to release their findings on the market on 27th March and are expected to call for a full investigation by the Competition and Markets Authority (CMA), what used to be the Competition Commission.

The Guardian newspaper reports unnamed sources claiming that the government is keen to bring on a long drawn out enquiry but not for the benefit of consumers. The source told the Guardian:

“Ministers would love the whole public and political row over power prices to be kicked into the long grass until after the next general election”

Following a summer of untypical interest and success in government intervention in the business energy market, David Cameron launched the review in October so as to

“get to the bottom of whether this market can be made more competitive.”

The government has for some time now realized all is not well with the UK energy market and after tackling business energy scandals such as the prevalence of roll over contracts and the pernicious influence of back billing, it now seems that the focus is far wider and more ambitious.

The Federation of Small Businesses (FSB) support the call for a full enquiry and have even followed Labour’s lead in calling for a complete break-up of the Big 6 energy suppliers.

The sheer irony of a business centric organization calling for such state intervention in response to successful businesses takes some getting over but on a micro level one can understand the frustrations if not the unnecessary hyperbole. The shrieking precedent it may set is too awful to contemplate for UK businesses and surely is not something that would be allowed to happen under a Conservative administration.

That said, Labour are confident of both their position and their chances of election in 2015 and as such the threat of break-up for both the Big 6 energy suppliers and the regulator Ofgem are very real.

As a result, so the thinking goes, a competition enquiry, likely to take between 18 months and 2 years would straddle any potential 2015 election and have the effect of neutering the debate and blunting Labour’s war on business.

The rationale behind Labour’s position on the Big 6 has been boosted by DECC’s own figures, produced at the request of Shadow Energy Minister Caroline Flint, which have shown very little, if any movement in the market share amongst the Big 6.

SSE, E.ON and nPower hold exactly the same market share in gas now as over five years ago, 15%, 13% and 12% respectively.

By contrast British Gas’s market share for gas has fallen from, 44% in 2007 to 40% today, while EDF Energy saw its share rise from 7% to 9%. Over the same period British Gas’s electricity market share increased from 22% to 25%.

Flint said

“Anything that can help shine a light on the workings of the energy market is welcome.

“But consumers will be rightly disappointed if the government uses this review as an excuse to kick the problem of rip-off energy bills into the long grass.

“We have hardly been short of reviews of the energy market in recent years – but what has been missing is decisive action to protect consumers.

“Our plans will break up the big energy companies, put an end to their secret deals and make tariffs simpler and fairer. And until these reforms kick in, we will put a stop to unfair price rises by freezing energy bills until 2017”

Who will deliver the knockout punch? The government, the opposition, the authorities or the Big 6. Our money is firmly in our pockets, this one has got a lot of twists to come.

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