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
    +6

    Comment number 215.

    Energy belongs to the country. Nationalise it. No, you cant have any compensation.

  • rate this
    +5

    Comment number 214.

    Privatization is lauded by politicians as being great value due to competition and the efficiency that private companies can bring. Thanks to large profits, huge salaries, dividends to shareholders, price fixing and the cost of advertising (due to competition), we would be better off with an inefficient state run service, also some private companies are a total shambles (inefficient).

  • rate this
    +5

    Comment number 213.

    And who was it who started the so called "dash for gas" it was the newly privatised energy companies. I remember all the warnings that these companies and the tory govt of the day ignored about the dependance this would create. And they are still building gas plant, EON opened another one in 2010! Prices are only cheaper here because of North Sea gas which is now rapidly depleting.

  • rate this
    +4

    Comment number 212.

    To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.

  • rate this
    +4

    Comment number 211.

    It would be interesting to find out how many MPs etcetera have their fingers as share holders in the utility pies?

  • rate this
    +8

    Comment number 210.

    I think the recent complex arrangement re new nuclear is at least in part to make renationalisation as difficult as possible.

    Don't underestimate these people.

  • rate this
    +4

    Comment number 209.

    Geez...it doesn't take a rocket scientist to figure this out. Force the energy companies to offer tarrifs which track the whole sale price of energy + a margin for costs and profit!! Give people a choice!

  • rate this
    +2

    Comment number 208.

    All the energy firms are making big big profits and there appears to be transference to other parts of the overall group businesses, they may be operated separately but doesn't means it isn't happening at a group level in my opinion..

  • rate this
    +6

    Comment number 207.

    Its amazing how they can not tell why the usage has gone down...whether its better insulating or affordability. It's affordability, they charge a standing fee for equipment, they charge too much if you have a prepay meter, they charge too much for units. In short they charge too much. So I go cold, have fewer showers just to be able to afford a loaf of bread....maybe a cup of tea if lucky

  • rate this
    +3

    Comment number 206.

    Semi-nationalisation of the market place based on national security..

    Below 5C all domestic energy is free.

  • rate this
    +1

    Comment number 205.

    if talking kept us warm we would have to put the air con on [con the lot off them all gas and wind]

  • rate this
    +3

    Comment number 204.

    companies have to show gains compared to last years results in order to show some growth. Otherwise better to put them into a saving account. The market size is fixed and shared among them, therefore the only way to show gains is by asking a 10% increase a year.

    And all my efforts to save some on energy bills get evaporated every year. I may have to use candles in 10 years time from now!

  • rate this
    +2

    Comment number 203.

    I watched the Leveson enquiry wtaching the Murdochs squirming in their seats but we still await an acceptable outcome. Call me an old cynic but if this goes to a public enquiry then it will be years before we get satisfaction. Dont allow the increases, freeze prices for 12months whilst we get the truth..then index link prices to inflation

  • rate this
    +1

    Comment number 202.

    Charge for electricity and gas as they do in Spain; the more you use the more you pay, hence the single person and elderly pay less as they use less, the rich with their large homes use more and pay a higher rate per unit as they use more. Overall the companies get the same but the rich pay more and there is a good incentive to use less so green principles also addressed.

  • rate this
    0

    Comment number 201.

    A select committee grilling - you must be joking! The energy bosses must have felt they were being savaged by a dead sheep - to quote a famous politician. No questions from my MP on the committee quizzing why the north of Scotland have seen the electricity rise by 36% (yes you read that correctly) in the last 13 months by SSE. No mains gas for us outside of the cities north of Perth.

  • rate this
    +9

    Comment number 200.

    Am I right in thinking that this same Angel Knight, who is the spokesperson for the Energy Companies, was last seen as the spokesperson of the Banking Association.

    She told us that everything was ok with the Banks last time, do we believe her this time about the Energy Companies?

    I think she got her training as a Tory MP.

  • rate this
    +9

    Comment number 199.

    I believe all core utilities should not be privatised.

  • rate this
    -4

    Comment number 198.

    Vote for scrapping the green tax and collect customers saving now. People Power!

  • rate this
    +5

    Comment number 197.

    Privatisation doesn't work, not for essential services. How long will it be before the NHS is fully privatised? It's happening bit by bit, to G4S, ISS and others. Maybe we should privatise the police in that case, or the fire brigade? I can see if now:

    "If you have an emergency, please press 1 and have your long card number and expiry date ready so that we can deal with your emergency faster."

  • rate this
    +49

    Comment number 196.

    All essentials such as utilities and banks should have both public and private suppliers to keep each other in check.

    Private efficiencies will improve the public supplier, and public focus on not-for-profit will keep the private suppliers honest.

    Having only one or the other has been clearly shown not to work.

 

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