Competition in energy market a 'myth'

Competition in the energy market is a "myth", a consumer watchdog has told MPs.

Consumers are "getting it in the neck" from bloated and inefficient gas and electricity companies which feel no need to innovate or compete for business, said the chief executive of Energywatch Allan Asher.

The lack of competition in the UK market means prices are rising faster than in the rest of Europe, where Britain is ranked fourth for electricity costs and 10th for gas, he told the House of Commons Business and Enterprise Committee.

His evidence came amid growing consumer concern over the sharp spike in energy bills, which have largely been blamed on the rising global price of fuel, with oil at more than 125 US dollars a barrel.

But Asher told the cross-party committee that the failure of the competition structures put in place when gas and electricity were privatised in the 1980s was also playing a part in forcing up bills.

Over the past decade, the energy supply market has slimmed down from 20 competing companies to six giants who form a "comfortable oligopoly", with very little to choose between them in price terms, he said.

Although there was no evidence of direct collusion, Asher said he believed suppliers followed the lead of the dominant player British Gas in raising or lowering prices.

And he warned the situation would get worse if French giant EDF buys nuclear power generator British Energy. Already, the six suppliers own 55 per cent of the generating market, and this would rise to 75 per cent if the EDF deal goes through - something Asher said could result only in "worse service and higher prices".

He told the committee: "Sadly we have seen the 20 suppliers of 10 years ago shrink into just six in a comfortable oligopoly who really don't feel a need to innovate or compete, and sadly consumers are the losers.

"There is a myth that there is vigorous price competition between them. For the main product that they most actively sell, which is direct debit for `dual fuel' gas and electricity, the price difference between the cheapest and the most expensive rate is about £30 a year - it's just a few pence a week."

Image: Energywatch's Allan Asher

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