Martin Hickman: Suppliers run rings around regulators

Click to follow
The Independent Online

Britain's energy sector is failing. The infrastructure is old and crumbling, the proportion of climate-friendly renewables such as wind and solar is rumbling along at 5 per cent despite a 9.7 per cent target, metering is antiquated and bills are confusing and complex. And, perhaps the most immediate concern in a recession, bills are too high.

The Big Six energy suppliers don't need to collude to fix prices – they simply watch what their rivals are charging and tweak tariffs accordingly. They leave millions of people on expensive tariffs, leaving the juiciest rates for price-sensitive internet surfers.

They have little to fear from the regulator Ofgem. They have run rings around it, even managing to keep their outrageous right to inform customers of price rises two months later.

With the regulator in their pocket and a weak Government, they have almost complete control of the market. While the biggest six supermarkets – themselves subject to bitter claims that they stifle consumer choice – have 77 per cent of food spending and the biggest six banks and building societies have 94 per cent of current accounts, the Big Six energy suppliers have 99 per cent of customers. True, they have occasionally limited domestic rises when the oil price has spiked particularly spectacularly; not all years have been bumper ones.

Now, though, the trough in wholesale prices is so deep and is predicted to last so long, they are set for years of bonanza profits.

Even Ofgem has finally acknowledged bills are too high. But it ceded its last price controls in 2002, when it concluded that the market was working fine. At the start of 2008 it also insisted the market was working – before launching an investigation and finding £500m overcharging. Given its regulatory failure, only a customer exodus will sharpen competition. Last month two new operators, First: Utility and Ovo Energy, undercut the big boys by taking advantage of cheap wholesale energy.

Although the big suppliers have more expensive long-term contracts, almost everyone believes they could still cut bills. Some of their customers already pay hundreds of pounds less than others.

Ministers seem relaxed about prices, with only occasional harrumphing from the Department for Energy and Climate Change. Consumers don't have to be.