Ofgem order a competition enquiry into the big six, what does this mean for consumers?

The results of Ofgem's long awaited report are out, and in it they call for an investigation by the Competition and Markets Authority (CMA) into the UK energy market.  The main focus of the investigation will be whether the big six energy companies are stifling the market, preventing smaller companies from rising and generating some much needed stimulation and competition.  So what does this mean for bill payers and consumers?

 

The boss at Centrica (who own British Gas) spoke out after the report was published, criticising the investigation by saying it would cause an "increasing risk" of blackouts and numerous delays to investment in the sector.  Quite what Mr Laidlaw meant by this is still up in the air - this is an investigation into the market in general, not just the big six.  If investment in their companies is delayed for a few months, it's a small price to pay to get the market performing in the interests of consumers. 

 

ofgemTogether, the big six - SSE, Scottish Power, Npower, British Gas (Centrica), Eon and EDF - account for a whopping 95% of the UK's energy market.  Last year they increased their prices almost collectively by around 7% - 12% which was met with disdain from customers up and down the country.  This 'cartel style' price hike is something which we need to avoid in the future and the one way to be sure of that is to have a full investigation into the market and the barriers which may be preventing smaller energy companies from getting a foot on the ladder - companies which may not want to charge as much as the big six and may have differing views on customer service and how to better the market in general. 

 

Whereas the investigation by Ofgem was a useful and necessary precursor, the investigation by the competitions authority has the authority and clout to make real changes in the marketplace. If they so chose, the CMA could break up the big six - which is what Ed Davey proposed should happen to Centrica some time ago when it was revealed that they had more of a hold on the market than people thought and were accused of monopolising.  

 

According to Tim Yeo, chairman of the Energy Select Committee, the most likely result of the investigation will be the breaking up of the big six to make way for fresh competition.  He said in an interview today that, in his opinion, it would be the best way restore consumer confidence in the energy industry and move forward on investment plans.  The review is set to last 18 months and the results of the investigation will be made public by the end of 2015. 

 

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