Ofgem's long-awaited report into fuel prices has been welcomed by the £25bn-a-year energy industry, which has been accused of ripping off households. The Energy Retail Association called it a "timely and thorough report".
Broadly, Ofgem could find no cartel between the Big Six companies, although they do closely monitor each other's rises. The fact that three million people - 18 per cent of households - swap supplier yearly showed that the market is working well, Ofgem said.
But, it added, there are a few problems with the energy industry. It is not working well for the following groups: the elderly, the poor and people living in the countryside. Suppliers have been told to stop charging such vast different amounts according to the payment method (eg cheque or Pre-Payment Meter), something which it has been doing for years without Ofgem seeming to mind.
Is there a cartel in the energy industry? Well, no-one (almost no-one) has been claiming there is. What the now defunct Energywatch was claiming was that there was inadequate competition in the energy industry because there were too few suppliers. Ofgem helpfully supplies a chart showing how, since 1998, the 15 regional suppliers have beeen subsumed into the Big Six, who now supply 99 per cent of customers.
Ofgem says that competition for electricity is slack compared with that for gas, where the former regional leccy monopolies compete more vigorously with British Gas. In addition, prices are excessive for many customers on PPM (Pre-Payment Meters - or "Poor Pay More").
So the energy market does work well if you have a bank account, access to the internet and are savvy enough to hunt out the best deals, and particularly if you pay for dual fuel by direct debit.
But the energy market does not work well if you are one of the 4.3m electricity-only customers or the 5.4 PPM customers, or one of the other many millions who do not have a home computer or who are not knowledgable about energy liberalisation. According to Ofgem's figures, at least 9.7m customers (out of 33m) are receiving a poor deal.
When the annual statement that companies will now have to send starts dropping through the door, customers would be well advised to check if they are being ripped off.
For this and for stamping out the worst excess of PPM, which has been a scandal for years, Ofgem should be commended.
But the enduring question about how little competition there is in the industry - and how closely the companies' prices are - will not go away. A recent analysis by the Local Government Association found that shareholder dividends paid by the Big Six rose by 19 per cent, from £1.378 billion in 2006 to £1.635 billion in 2007 - up £75 per household.
After publication of today's report, Ed Mayo, chief executive of Energywatch's successor, Consumer Focus, said: "Ofgem has gone some way to highlight action to bring about fairer pricing but we remain concerned that there is a lack of true competition across the country."
Oh yeah! If there is no cartel then how come people who live within the Scottish Hydro electric area pay the same prices as those who live within Gas/oil/nuclear generation areas? If there was genuine competition then households in the north and west of Scotland should be paying a lot less than the rest of the UK.
Posted by: flipped | Monday, 06 October 2008 at 08:52 PM