Ofgem Launches Energy Review
It’s been announced this morning that Ofgem is to review energy providers after recent price rises. Ofgem says recent price rises by companies including British Gas and ScottishPower has “significantly widened suppliers’ profit margins”.
According to Ofgem in September the net profit margin was £65 for an average customer but this has increased now to £90. Consequently Ofgem has now announced that it will review the domestic energy market and assess whether any action is needed to protect customers.
However, a similar review in October 2008 found there was anti competitive behaviour by the big six energy companies so it may be advisable not to get your hopes up just yet that energy companies will be forced to lower prices.
Despite Ofgem announcing a pricing review they won’t complete the review until March of next year – well after we have had to pay increased charges for energy over the winter period.
Speaking from Consumer Focus, Adam Scorer said the problem with the energy market was how it’s currently structured. It’s this structure that prevents the market from being competitive and it was practically impossible for a new company joining the sector to compete with the big six suppliers. This lack of competition means they have no incentive to be more competitive.