UK to investigate anti-competitive behaviour in energy market

7 February 2008 – British MPs are to investigate claims that gas and electricity firms are rigging the market to force huge price rises, according to the Daily Mail.

The Commons Select Committee for Business announced an inquiry into ‘possible anti-competitive behaviour in the UK energy market’. The MPs will hear calls for the imposition of a multi-billion pound windfall tax on the industry to help lift families out of ‘fuel poverty’.

Consumer groups complain that the ‘big six’ energy companies and their wholesale suppliers have carved up the market. Bills have risen 60 per cent over the past five years, which has left suppliers collecting an extra £8bn ($15.7bn) a year from customers.

RWE npower recently announced price rises of up to 27 per cent, while British Gas and others have imposed increases of around 15 per cent.

The firms claim they are victims of a rise in international wholesale prices, which have been driven up by concerns over shortages. However, critics say there is no good reason for the surge in wholesale prices, other than to deliver huge profits to the power industry.

The MPs want to know whether European power giants have rationed supplies to the UK in the winter in order to boost prices. The committee will also focus on allegations that the industry regulator, Ofgem, failed to protect consumer interests.

MPs are particularly alarmed because the number of those in ‘fuel poverty’ has doubled in the last three years to around 4.5m. High prices mean this group must spend more than ten per cent of its disposable income on keeping the lights on and staying warm.

The Treasury is collecting a VAT windfall of an extra £400m a year compared to five years ago because of higher bills yet recently announced cuts to a programme designed to help the poor insulate their homes.