An Electricity and Gas Price Cartel? Why Ofgem Can't Tell

The Evening Standard (London, England), September 17, 2009 | Go to article overview
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An Electricity and Gas Price Cartel? Why Ofgem Can't Tell


Byline: Robert Lea energy analysis

[bar]cartel n. an agreement or association between two or more companies or businesses for regulating output or fixing prices. Some countries including the UK and the US have legislation forbidding cartels on the grounds that they are monopolies that function against the public interest

Cartel. It is the "C" word the UK household energy industry dare not even whisper.

Ofgem, the industry's regulator, says there isn't one. It's held an inquiry which tells us so -- though that hasn't stopped the regulator threatening the industry with referral to the cartels police at the Competition Commission if, like last winter, the industry did not pass on the benefits of falling wholesale gas prices in the form of lower household bills.

We are here again. the price of wholesale gas, which was last year trading at more than 60p a therm, has fallen sharply recently and been priced below 20p a therm this week.

Yet there are no signs of a cut in retail prices, which currently mean an aver-agannual household bill of [pounds sterling]1250, double where they were at the start of the decade and contributing to the billions of pounds of profits made by British Gas, e.On, eDF, npower, Southern electric and Scottish Power.

But with no further cuts apparently in prospect, independent evidence indicates that households are routinely being overcharged.

Consumer Focus, the publicly funded watchdog, says its investigations indicate gas prices should be cut by 15% and electricity charges lopped by 7%, adding up to annual saving of more than [pounds sterling]150 a year for the consumer.

Philip Cullum of Consumer Focus fumed: "Consumers have feared for months that the big six suppliers might not have passed on the full cuts in wholesale prices, but the companies claimed to have acted fairly.

"Our research for the first time shows the energy companies are pocketing [pounds sterling]1.6 billion extra while millions of households struggle to make ends meet. energy firms should take immediate action to put things right."

the watchdog however declined to use the "C" word. and, of course, asking the energy companies to cut prices in the interest of the public is as laughable as lord Mandelson's demand that the Phoenix Four, the miscreants in the MG rover fiasco, hand themselves over to Companies House so they can be banned as directors.

that the companies, seemingly acting as one, refuse to cut prices poses the not unreasonable question: are these six suppliers acting as a cartel? Just because Ofgem says it has found no evidence does not mean a cartel does not exist. Similarly, just because the Big Six operate in an utterly deregulated market does not mean competition is working properly.

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