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
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Mortgage Advisor - OTE £95,000

£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Day In a Page

Isis in Syria: Influential tribal leaders hold secret talks with Western powers and Gulf states over possibility of mobilising against militants

Tribal gathering

Influential clans in Syria have held secret talks with Western powers and Gulf states over the possibility of mobilising against Isis. But they are determined not to be pitted against each other
Gaza, a year on from Operation Protective Edge: A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians

Gaza, a year on from Operation Protective Edge

A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians
Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously

Illnesses, car crashes and suicides

Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously
Srebrenica 20 years after the genocide: Why the survivors need closure

Bosnia's genocide, 20 years on

No-one is admitting where the bodies are buried - literally and metaphorically
How Comic-Con can make or break a movie: From Batman vs Superman to Star Wars: Episode VII

Power of the geek Gods

Each year at Comic-Con in San Diego, Hollywood bosses nervously present blockbusters to the hallowed crowd. It can make or break a movie
What do strawberries and cream have to do with tennis?

Perfect match

What do strawberries and cream have to do with tennis?
10 best trays

Get carried away with 10 best trays

Serve with ceremony on a tray chic carrier
Wimbledon 2015: Team Murray firing on all cylinders for SW19 title assault

Team Murray firing on all cylinders for title assault

Coaches Amélie Mauresmo and Jonas Bjorkman aiming to make Scot Wimbledon champion again
Wimbledon 2015: Nick Bollettieri - Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!

Nick Bollettieri's Wimbledon Files

Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!
Ashes 2015: Angus Fraser's top 10 moments from previous series'

Angus Fraser's top 10 Ashes moments

He played in five series against Australia and covered more as a newspaper correspondent. From Waugh to Warne and Hick to Headley, here are his highlights
Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high