Big six energy firms deny Ofwat price fix claim

Ofgem claimed earlier this year energy competition is being ‘stifled’ by a combination of tariff complexity, poor supplier behaviour, and lack of transparency.

Chair of the Energy and Climate Change Committee, Tim Yeo MP, in Westminster today (May 11) quizzed the big six energy providers on Ofgem’s Retail Market Review.

The biggest six energy companies in the UK are British Gas parent firm Centrica, EDF Energy, E.ON UK, RWE npower, Scottish and Southern Energy and Scottish Power.

Mr Yeo said: “Can I ask you whether you accept Ofgem’s statement that energy prices tend to rise in response to wholesale gas increases more quickly than they fall with decreases of wholesale costs?”

E.ON UK director of regulation and energy policy, Sara Vaughan, said: “I think if you look at what Ofgem says they say there is ‘some’ evidence that prices move in that way … it’s not if you like a definitive conclusion.

“They’re applying a flat 18 month hedge when they’re doing their modelling, which isn’t necessarily the length of hedge each of us (the big six energy firms) would apply.

“Companies are only making a margin of 1.6% which is well below the margin they’re seeing in supermarkets and other retailers.

RWE npower director of economic regulation, David Mannering, said: “It’s not clear cut at all, because they (Ofgem) have made a number of assumptions.

“Are there explanations for prices rises the answer is most definitely yes, we incur costs changing our prices.

“So if it costs £1 to write to every customer that’s £4million in our case and companies have a motivation to reduce costs.”

Scottish Power’s chief executive of Scottish power generation, John Campbell, said: “I don’t believe the evidence provided would justify the statement I have questions about the findings and analysis of it if it was true.”

Luke Walsh