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Wednesday
21st May 2008
Britain's electricity and gas markets have been branded 'a comfortable
oligopoly' by Allen Asher, head of consumer watchdog Energywatch.
Energy suppliers currently feel little need to compete and innovate, as
the number has fallen from over 20 suppliers to just six, with some areas
dominated by two or three companies.
Calling for an investigation, Asher said: "There is a myth that there is
vigorous price competition between [the suppliers]. For the main product they
most actively sell - direct debit for dual fuel,
gas and
electricity - the price
difference between the cheapest and most expensive is £30 a year; it's just a
few pence a week," Asher told the cross-party business and enterprise select
committee.
He also criticised the situation around pre-payment meters, with the poorest
people being charged more than they would be if they were paying by Direct
Debit. Pre-payment meters should be called "the poor-pay-more meters", he
said.
These comments came as Asher spoke at the first part of the committee's
enquiry into competition in the UK's energy markets, after continued price rises
pushed annual household bills above £1,000 for the first time this year.
There are also fears that bills could rise by up to another 40% by the end of
2008 after British Gas, Britain's largest energy supplier dropped hints that
its customers would be subject to further rises by the end of the year due to
rising wholesale costs. The other 5 major suppliers are all expected to
follow suit when this happens, as has been the trend in recent years.
Committee chairman Peter Luff said that they had never before received so
many submissions "from the outside world" as for this inquiry. Many other
parties are expected to give evidence over the coming weeks including
large energy users,
energy companies and charities concerned with
fuel poverty.
When speaking of large profits, Asher said that many of the energy
oligopolies are extremely inefficient: "Often they have high cost structures and
are inefficient ... and consumers are losing out" he said.
He went on to talk of the possibility of British Energy being sold to one of
the UK's vertically integrated energy companies, which could lead to one company
controlling three-quarters of electricity generation. According to Asher
"The only logical consequence of that is worse service and higher prices."
Britain's previously competitive energy market has dissipated as the rest of
Europe has caught up, with the mistake being that "we started to believe our own
rhetoric. We went to sleep at the wheel."
Asher knows Britain needs new generating capacity, but also stated that there
are barriers to entry for any prospective companies. When asked about
rumours of new entrants he said: "At the gym I use, thousands of people have
membership but don't turn up."
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