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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  • Comment number 175.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +6

    Comment number 174.

    Utility Boss:-Ah Sir Humphrey,am I glad to see you.
    Civil Servant:-Tony,how are you?
    UB:-Awful Humpy,the reds are after closing down our cartel
    CS:-Yes I heard,people can't afford it Im told?
    UB:-Turning pinko Humpy?
    CS:-Perish the thought!
    UB:-Well any ideas? We haven't a moral leg to stand on.
    CS:-Simples,ask for an inquiry,that should delay reform
    UB:-Humpy you're a star,time for a snifter?

  • rate this
    +7

    Comment number 173.

    The problem is they own the production side of energy aswell as the retail side and as a result set their own prices, the government must split them up or nationalise.

    On the other hand the EU and japan have put money forward to build the clean coal power station in doncaster but the government refuses to build it even with little cost to them, It seems government like to keep energy prices high.

  • rate this
    +1

    Comment number 172.

    It's too early to know the whole story, but perhaps this will be a good example of the strain caused by allowing essential household costs to go unchecked?

  • rate this
    +2

    Comment number 171.

    While conventional energy costs are going up, alternative energy costs are coming down. Nuclear disposal and carbon capture are both currently science fiction.

    If its a choice between windmills, nuclear, or fracking, I'd vote for wind. Its the one that would create the most UK jobs and companies, and exportable products in wind technology that the others can't.

  • rate this
    +2

    Comment number 170.

    Civil court class action?

    Am looking for a bumper payout just like the FAT CEO's of these companies.

    Happy days, and just in time for Christmas too!!

    FAT CHANCE.

  • rate this
    +2

    Comment number 169.

    Even if decreases in wholesale prices don't result in lower retail prices because of anticipated increases, or whatever, they should obviously result in at least longer waits between retail price increases. This has not happened. Why?

  • rate this
    +11

    Comment number 168.

    Energy company profits have doubled in a year while wholesale prices have risen by only 1.7% and still they hike prices by an average of 10%. Now tell me they`re not profiteering.

  • rate this
    +4

    Comment number 167.

    Dave, are you going to put on your 'sincere, resolute yet caring and concerned' face next time you are interviewed about the energy companies? It's my absolute favourite! Loved the advice too you dispensed to, what you might like to call, the annoying little people of no consequence (to others, they are the electorate) to switch suppliers. Thank you, Dave, for looking after us!

  • rate this
    +7

    Comment number 166.

    I don't use gas but have a gas meter. I pay 30.23 p a day/£110.34 a year standing charge. I asked EON to waive the charge. The advisor blamed the Government. However, EON's free to charge £0. This is the essence of licensed robbery. The utililty cartel sells utilities to each other to inflate prices and blames the market; this is tantamount to corruption. More old people will die this winter.

  • rate this
    +11

    Comment number 165.

    Why do successive Tory governments hate state ownership of national assets, but are quite happy to flog said assets to shareholders even if the shareholder is a state run company of another nation, eg: France, Germany, China etc, How is this good for the UK's .
    Basically when you pay your fuel bill, you are in effect giving money to another country in the form of share dividends.

  • rate this
    +1

    Comment number 164.

    @103. boundah, based on what? there is no competition now you fool

  • rate this
    +11

    Comment number 163.

    Energy companies now rush to put their prices up in the face of rising wholesale costs. A ear ago wholesale fuel prices dropped through the floor. Where was the rush then by the same companies to reduce prices?

    Tell me that.

  • rate this
    -1

    Comment number 162.

    How do they sleep at night? Don't they realise that their greedy decisions kill vulnerable people. What on earth is their motive? Do they get bonuses for how much they cheat people?
    As a nation we rue the day Margaret Thatcher became prime minister and "monetarised" so many aspects of life that were previously shared by everyone.

  • rate this
    +6

    Comment number 161.

    These companies endlessly move money around internally & through offshore shells to avoid any tax. They don't invest in the future of power generation so the taxpayers & consumer are expected to pick up the bill to cover the gap. 10 years of record profits - 10 years of underinvestment. What an extraordinary coincidence

    & like rail - complete destruction of UK engineering capability

    Tories...

  • rate this
    -1

    Comment number 160.

  • rate this
    +3

    Comment number 159.

    TOTALLY AGREE


    @ 146. McGill


    The answer is so simple!!

    Remove profit, remove dividends, reduce prices by 15% overnight.

    Renationalise.

  • rate this
    +2

    Comment number 158.

    Westminster MPs will do nothing while the - mainly foregn owned - energy companies run rings round them.

    Which other countries sold off their energy supply and water utilities to foreigners - not to mention all the other things?

  • rate this
    -5

    Comment number 157.

    Nationalisation is superficially attractive but the problem is that we are no longer self-sufficient in energy. It is one thing to have a nationalised industry in control of our own resources but quite another to expect a nationalised industry to compete efficiently in obtaining supplies from abroad.

  • rate this
    +6

    Comment number 156.

    these french owners seem to be able to sell it and "transport" it to french homes a damn site cheaper than ours. Does electricity weigh more in the UK? Does it run down the cables with more resistance in the UK?

    What utter nonsense spouted by a cartel of price fixing robbers.

 

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