Energy boss calls for competition inquiry into market

 

E.On boss: "We are not trusted"

The boss of one of Britain's largest energy companies has told MPs that there should be an inquiry into the whole energy market.

Tony Cocker, the chief executive of E.On, said he had written to Prime Minister David Cameron to suggest a full investigation.

"We need to have a very thorough Competition Commission inquiry," he said.

He was speaking in front of MPs on the Energy and Climate Change Committee.

Another energy company, EDF, suggested the same thing earlier this month.

Andrew Wright, the acting head of the regulator, Ofgem, told the MPs that competition in the market would be fully examined in a review due out in the Spring of 2014.

"We will look at all aspects that affect competition in the market," he said.

But Centrica, the parent company of British Gas, said a full competition inquiry would not be helpful.

"We believe it unnecessary as the market is competitive," said a spokesperson.

"There have been numerous inquiries into the energy market and none have found any evidence of anti-competitive behaviour.

"However, if it'll take another inquiry to improve trust then we are supportive."

Prices

The bosses of the six largest firms in the UK had been summoned in front of the committee to justify their recent price increases.

So far, four of the companies have announced increases that average 9.1%, with the others expected to follow.

The four firms involved have insisted that the rises were largely due to increasing wholesale prices.

William Morris, the managing director of SSE, told MPs that his firm had faced a 4% increase in wholesale costs over the last year.

price of fuel

He said the cost of transporting energy to homes had risen 10%, while the cost of government and environmental schemes had risen 13%.

But the regulator, Ofgem, has argued that wholesale prices have risen by less than the rate of inflation.

Its data suggests that wholesale electricity and gas together have risen by just 1.7% over the last year.

It estimates the net effect of wholesale gas prices on a household bill should be just £10 extra on a bill of £600.

Mr Fitzpatrick speaking to MPs last year

Stephen Fitzpatrick, the managing director of Ovo Energy, a small independent energy company, told MPs that wholesale prices paid by his company were actually falling.

"I can't explain any of these price rises," he said. "I have been somewhat confused by looking at the explanations for the price rises that we've seen in the past three or four weeks."

Labour leader Ed Miliband dismissed the energy companies' explanations for price rises as "a list of excuses".

'Filibusters'

MPs also asked the energy bosses whether they were buying energy from different parts of their own business, thus inflating prices.

Most of them have a separate generation business as well as a retail business.

But Tony Cocker, the chief executive of E.On, denied they were transferring money to their generating arms.

fuel breakdown

"There is no cross-subsidy between the two businesses. We operate them as stand-alone businesses," he said.

Martin Lawrence, a managing director of EDF energy, agreed.

"We operate our businesses entirely separately," he said.

The bosses were also asked about the level of profits in their retail arms.

Guy Johnson of Npower said they had invested £2.9bn in the UK in the last five years.

"We've invested 100% of what we have earned in the last five years from generation," said Tony Cocker of E.On.

"I speak for a company that is proudly operating power stations and proudly investing in new power stations to ensure the lights stay on."

But Stephen Fitzpatrick, of Ovo Energy, said the big companies were charging 10% more than they should be.

"We're all trying to tack down where this money is going, But you will never find it," he said. "These guys are the best filibusters in the business."

Start Quote

Do you understand that the people in this country do not trust you?”

End Quote Ian Lavery MP

Start Quote

I completely agree with you”

End Quote Tony Cocker CEO, E.On
Transparency

MPs on the Energy Committee also wanted to know how the transparency of the energy companies' finances can be improved.

"Do you understand that the people in this country do not trust you?" asked Ian Lavery MP.

"I completely agree with you," said Tony Cocker.

"But we have worked very hard to improve our business and simplify our tariffs," he told the MPs.

In a letter to the committee, Ian Peters, the managing director of energy at British Gas, admitted that there was further work to do on that.

Later this week, the Energy Secretary, Ed Davey, is expected to set out further details of the annual competition test for the energy market.

The review will be carried out by Ofgem in conjunction with the Office of Fair Trading (OFT) and the new Competition and Markets Authority (CMA).

The government has also said it will look at the contribution made to energy bills by the green levies, although these make up a relatively small part of overall costs.

Labour said it would freeze energy bills for a period of 20 months if it won the next election.

 

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  • rate this
    0

    Comment number 915.

    Wholesale price may go up and down, but retail price has always been up only. Why?
    “This is a very complicated business”, they make it so complicated and confusing that nobody could challenge them.

  • rate this
    +3

    Comment number 914.

    @185.Vampire

    We may have some of the cheapest energy, however we also have some of the lowest paid workers in Europe and one of the highest costs of living.

    Millions of people cannot afford to put the heating on this winter and something needs to be done about it - so the likes of you should "give it a rest".

  • rate this
    0

    Comment number 913.

    No freedom of speech BBC? Does the truth hurt? I make no apologies. I speak the truth! I will always defend your freedom to remove my comment even though I disagree with your uneducated actions.

  • rate this
    +1

    Comment number 912.

    897.
    corinthian
    Why do some of the brightest people in the country allow this ?

    ---

    Because they are'nt the brightest, and have been bought by the power compan.. sorry alledgedly bought by the power companies and their political donations.

  • rate this
    +1

    Comment number 911.

    Current regulatory mechanism is a joke.
    The energy companies are having a laugh.
    It needs a root and branch modernisation.

  • rate this
    +1

    Comment number 910.

    David and his government is claiming they are controlling the country but they can not control six company? And yet talking about £ 150 is enough for people to live their life.............

  • rate this
    0

    Comment number 909.

    I think its a bit of everythink thats pusing the prices. The market is not competative there are 6 companys and 4 of them all raise there prices at about the same amount at the same time thats just blatent. secondly they are fearing a price freeze so i think some of the blame can go straight at ed,s door only labour could cause such damage whilst not even in power. toped of with huge bonuses

  • rate this
    +4

    Comment number 908.

    This is what happens to a country when it sells all the major and essential companies be it gas, electricity, water, trains telephones and now Royal Mail. We are at their mercy.. The greedy private investors now own each and every facility we use Gas, electricity and water should be state owned. BELONGING TO US!! Not the French, Spanish German or any anyone else. Reclaim them all

  • rate this
    +3

    Comment number 907.

    The most sickening thing about the whole rotten rip off is the spectacle of MPs, some of whom charge the public purse 3p travelling expenses when they are millionaires several times over, pretending to care about it all by undertaking the questioning charade. Just like when they pretended to get tough with the M*rdochs having been in their back pockets for decades.

  • rate this
    +3

    Comment number 906.

    So now we've got some of the energy companies saying "oh don't be silly. We don't need an enquiry into the market. It's all above board". Yes, just like MPs weren't fiddling expenses, just like the police didn't lie about Hillsborough and the US don't spy on friends ...oh wait.

    Let's have a damned good look at them and let us decide.

  • rate this
    +3

    Comment number 905.

    Energy bod - "We make 5% profit"

    MP - "So thats 5p in £1?" Energy bod "Yes"

    "But after taking out the VAT and Green Tax element its 5p in every 87p, so isn't that a bit more than 5% profit?"

    The energy companies just want to bambozzle us. They say prices are up as they have to invest, but surly the investment should come from the generating arm, which would be covered in the wholesale cost.

  • rate this
    +3

    Comment number 904.

    889 - Irish Sea, North Sea, renewables, nuclear, etc, etc - though I imagine you're the sort of fatalist (can't do capatilaist) who would subsidise a French state-owned company to produce British energy and lock UK citizens into double prices for 35 years...

  • rate this
    +4

    Comment number 903.

    Organized greed always defeats disorganized democracy

  • rate this
    +1

    Comment number 902.

    Imagine 42 billion worth of solar panels for the people :-) Some of us could even have a sort of life, you know, like in the stories.

  • rate this
    +3

    Comment number 901.

    "Don't tell Sid"

    You see now what they didn't want to tell Sid...

    Free and infinite energy has been known about since the 1950s.

    But it's not in 'their' interests.

    You can't meter the infinite.

    You think our (behind closed doors) technology extends to extracting energy from lumps of coal, or a breath of wind, or the tide?

    Think again.

  • rate this
    +1

    Comment number 900.

    Any enquiry into energy should also include exacting comparisons & break down in costs as compared to other EU nations.

    If we cannot clearly see what others are paying, then how can we ever know if we are paying too much.

    My worry is, that maybe energy companys are doing what Amazon etc do, & overcharge themselves for loans & other resources paid to other parts of companys, abroad

  • rate this
    +1

    Comment number 899.

    At privatisation these companies were valued and sold on the basis that they would have operating costs of 1.5% of turnover and profits of 1.5% of turnover and have been raising profits ever since. They are right about one thing, mobile phone companies are also ripping us off on sold off assets. Hospitals and Postal services next. No one is looking at affordability. The poor don't exist

  • rate this
    +2

    Comment number 898.

    Bilderberg group... just one of many we know of. Imagine how many others exist. The world's most powerful elitest,from all walks of society in one secret meeting. To determine the future of the world (economically- as that controls all other aspects of life). And I say this a pretty well educated and life-experienced individual (doctor). Good on this guy for speaking up. Agree with 196's comments

  • rate this
    +2

    Comment number 897.

    I thought cartels were illegal.Whether I am right or not, all the energy suppliers i.e. bill providers, get together and decide what the next rise will be.This is usually about 4 times the rate of inflation, yet despite mild rebuke from the government, it goes through, and wages and benefits fall even further behind price increases.Why do some of the brightest people in the country allow this ?

  • rate this
    +1

    Comment number 896.

    what a joke - it can all be traced back to the day the day Thatcher sold it all off and they can now charge what they like and there is diddly squat anyone can do about the thieving bar stewards until they are back in public ownership. The timing and price fixing of rises by all 6 companies is sickening - they will be responsible for many old people's deaths this winter who will cut back.

 

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