Ofgem queries energy retail profits

The Competition and Markets Authority has been asked to decide ‘once and for all’ whether profit rises for energy suppliers are due to lack of competition.

Centrica, SSE, RWE, npower, E.ON, Scottish Energy and EDF Energy control 95% of the retail supply.

Ofgem reported that the ‘big six’ profits had risen from £233m in 2009 to £1.1bn in 2012. It said there was ‘no clear evidence of suppliers becoming more efficient in reducing their own costs.

‘Further evidence would be required to determine whether firms have had the opportunity to earn excess profits’.

It also said there was evidence of ‘possible tacit coordination reflected in the timing and size of price announcements’. This reduces competition, which can worsen the deal for consumers. There is also ‘new evidence that prices rise faster when costs rise than they reduce when costs fall’.

In a recent announcement, energy company SSE said it would not increase its prices for five million customers until 2016.

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