Ofgem plans competition inquiry ‘to break up the Big Six’

Regulator to take action after SSE announces price freeze till 2016 that will cost £100m

Environment Editor

The big six energy suppliers face the prospect of being broken up when the regulator announces a shake-up of the industry today.

A day after Britain’s second biggest gas and electricity supplier, SSE, announced an unconditional two-year price freeze, Ofgem will kick off a process that is likely to involve a full-scale competition investigation into the energy sector.

This will probe whether British Gas, Scottish Power and the other four big-six providers should be broken up into completely separate retail and energy generation businesses. This would address persistent allegations that they are attempting to disguise the profit they make from supplying cash-strapped households by hiding some of it in the accounts of their generation operations. The big six have always strenuously denied any such activity.

The investigation is also expected to cover why the main energy companies typically tend to increase and decrease their prices within a few weeks of one another – which has raised concerns about industry collusion – and to delve into British Gas’ dominating 41 per cent share of the gas market.

The political tension around energy prices reached a new high yesterday after SSE said it would freeze prices until 2016.

During Prime Ministers Questions yesterday, Ed Miliband appeared to take some credit for SSE’s move – which came six months after he promise to freeze prices for two years if elected prime minister. He accused David Cameron of being “not the prime minister at all, but a pr man for the energy companies”. At the time, Mr Cameron dismissed his price freeze pledge as “unworkable”, but yesterday he welcomed SSE’s announcement. Mr Miliband said: “We’ve obviously misunderstood the prime minister. He is the champion of the price freeze. Week after week he denounced Labour’s call for an energy price freeze to help families and businesses, but now apparently he supports a price freeze.”

The other five big six providers were weighing up their options yesterday after SSE announced a unconditional price-freeze until 2016. The group insisted that the timing of its announcement had nothing to do with today’s Ofgem announcement – although many in the industry remained sceptical.

A source at one rival said: “SSE’s announcement is not a happy coincidence, not in a million years.”

An employee from another rival added: “I’m sure all the companies will react in some way over the next few weeks.”

Ofgem is expected to put the issue of whether to launch a full-scale competition inquiry out to consultation first – a process that will take six to eight weeks – with a two-year review of the industry expected to be announced early June.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Accounts Assistant

£30,000 Annual: Sheridan Maine: A fantastic opportunity has arisen for a perso...

Richard Bishop: Accounts Payable Clerk

£11 - £13 Hourly Rate: Richard Bishop: Are you looking for a purchase ledger r...

Jemma Gent: Management Accountant

£250-£300 Day Rate: Jemma Gent: Are you qualified accountant with previous exp...

Richard Bishop: Accounts Payable Clerk

£11 - £13 Hourly Rate: Richard Bishop: Are you looking for a purchase ledger r...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor