Tesco abandons move into gas and electricity sales

Hopes for a flood of new competitors in the emerging domestic energy markets were further dampened yesterday when it emerged that Tesco, the UK's biggest selling supermarket group, had abandoned a move into gas and electricity retailing.

Tesco has given up attending meetings of independent suppliers organised by the watchdog Ofgas since the beginning of the year. The retailer was the only one of the large supermarket chains to join in the meetings of the Domestic Competition Focus Group, which acts as an information exchange for businesses interested in participating in the emerging domestic market. Tesco had a small team of staff working on the project, led by Steve Mcardle, a marketing manager in its Clubcard department.

This week Southern Electric, the last remaining independent regional electricity company, said it understood the supermarket groups had abandoned plans to sell gas and electricity.

Sainsbury had called off discussions with independent gas companies earlier this year apparently after fears that its brand might be damaged by repetitions of the marketing problems in domestic gas competition trial areas in the south of England. Independent suppliers had hoped to forge alliances with the supermarkets to tap into their loyalty card customer databases.

Observers also point to low profit margins of as little as 1 per cent in the electricity supply market and uncertainties of securing wholesale gas supplies at competitive prices.

The oil giant British Petroleum has also distanced itself from the domestic market. One of BP's executive committees is believed to have discussed proposals to move into the gas market for the third time without reaching a decision.