Are 'Big Six' using market power to boost energy prices?
Published 25/07/2014 | 02:30
AN investigation by the UK competition authority into the energy market will look at whether the six biggest utilities use their market power to raise prices.
The UK's Competition and Markets Authority (CMA) will examine whether low liquidity in wholesale power prices creates barriers to entry and inefficiencies in the market, according to a statement setting out the scope of the inquiry.
The CMA will also probe whether vertically integrated companies harm competition through increased costs or reduced supplies for non-integrated energy suppliers.
The inquiry, which will publish its report by the end of 2015, excludes larger business customers. Energy regulator Ofgem referred the companies to the CMA last month amid concern across all political parties that utilities are raising prices faster than inflation. The opposition Labour Party pledged to freeze prices if it wins the general election.
"The inquiry is only there to diffuse criticism from the opposition in the lead-up to next year's general election," Lakis Athanasiou, an analyst at Agency Partners LLP, said.
The likely outcome is a forced divestment of customers to smaller companies, "which would allow the CMA to demonstrate its teeth. This is unlikely to benefit customers and may even increase costs," he said.
The six biggest suppliers are Centrica, SSE, Iberdrola's Scottish Power, RWE 's nPower, Electricite de France and EON SE. (Bloomberg)