Martin Hickman: Once the election passed, the will to tackle prices dimmed

We have a fully privatised industry which should be more efficient, and vast gas reserves in the North Sea
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The Independent Online

When concern about fuel bills rose during the winter, opposition politicians accused the Labour government of failing to get tough with suppliers and called for the Big Six players to be referred to the Competition Commission.

This was a bold, welcome demand: Competition Commission inquiries can lead to dramatic results. Ask the banks which are slowly being forced to relinquish their dodgy trade in payment protection insurance, or the airports operator BAA, which was forced to sell Gatwick.

The Lib Dem manifesto declared: "Energy bills are far too expensive for many people, and suppliers have not done enough to protect those who cannot afford to keep warm." The party's Chris Huhne is now the Energy Secretary.

Yet once the general election passed, the Conservatives' and Liberal Democrats' radicalism on energy prices dimmed.

In a European context, British customers enjoy slightly below average gas prices and average electricity prices. This is hailed by the industry as evidence that competition is working, but two things set Britain apart from Europe, and mean we should have lower prices for both electricity and gas.

First, we have a fully privatised industry, which should be more efficient, indeed is more efficient, than the mostly state-owned or semi-state-owned suppliers on the Continent. Second, we have vast gas reserves in the North Sea. Although these reserves are falling, we import half our gas – less than most European countries.

In the long term, bills will have to rise to pay for investment in green power necessary to combat climate change. Suppliers will say these investments mean they cannot cut prices; the reality is they are likely to ask for state subsidies to build these new power stations. If they were committed to renewable power, the companies would be generating more than the 5 per cent they do already, below the Government's target.

Because the energy industry's finances are so opaque, it's difficult to work out how much firms are paying for their supply and how much they are overcharging the public, as many analysts and campaigners believe. The Big Six own both generation and supply, and the four of the six that are foreign-owned do not divulge their UK results in the same way as their British counterparts.

There is a reason, though, why British Gas's profits leapt by 98 per cent in the first six months of this year, and it's not all down to the cold snap in January. The suppliers have not fully passed on falls in wholesale costs.

If they are doing nothing wrong they have nothing to fear from a Competition Commission inquiry, which would settle the argument once and for all.

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