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BRITAIN’S biggest energy companies have stifled competition to raise prices and make record profits of more than £4.5 billion, a Sunday Times investigation has found.
The six companies that control Britain’s gas and electricity are now facing demands that they be referred to the Competition Commission.
Executives in charge of the six major companies were last week confirmed to be holding confidential meetings at least every two months to discuss market strategy. Smaller rivals are excluded.
The new disclosures come as a YouGov poll for The Sunday Times reveals that more than eight out of 10 customers believe they are being “ripped off” by the energy firms. Alistair Darling, the chancellor, is to meet Sir John Mogg, the head of regulator Ofgem, tomorrow for an explanation of the latest round of price rises.
Industry insiders said they are ready to give evidence about how the “big six” have driven up prices and boosted profits by:
- Keeping each other’s prices in step by raising and lowering tariffs within a few weeks of each other.
- Denying smaller rivals fair access to energy from their own power plants at affordable prices.
- Charging loyal customers significantly more than those who switch, so keeping up profits.
- Stifling competition by supporting laborious and expensive accreditation for new companies.
Allan Asher, chief executive of Energywatch, the consumer watchdog, said: “The problem with the energy market is that it’s lazy, complacent and uncompetitive. It has been able to drive out the possibility of any vigorous challenge to the prominence of the big six energy suppliers.”
The companies enjoyed a “bumper year” in 2007, profiting from a dramatic fall in the wholesale price of gas amid allegations they failed to pass on savings to householders. Analysts believe the companies are now poised to report record annual profits of more than £4.5 billion.
The companies last week confirmed that they were meeting regularly under the auspices of the Energy Retail Association. The association says market-sensitive issues are never talked about and pricing policies are discussed only in the context of a public debate about best practice. Rival energy companies say the association is a “closed shop” for the dominant companies and the minutes of meetings should be published.
The Sunday Times YouGov poll found that 85% of customers felt they were being ripped off by the energy firms. This compares to 76% of people who felt they were being ripped off by the railways; 74% by the petrol companies; and 59% by the banks and financial service industry.
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Alistair Darling and the rest of the politicians rely on friends in the energy industry and banking to provide them with lucrative directorships upon retiring. There is no way that they will ever clamp down in a meaningful way on their benefactors.
John Jones, Milton Keynes ,
i would like to correct bob vucenovic of hove that SWALEC is actually owned by SCOTTISH AND SOUTHERN ENERGY and not edf energy. SSE is in fact a truly british company so get your facts right mate!
sammy, SWANSEA, UK
I've just spent an interesting couple of hours online, comparing prices directly posted by leading company websites in Britain, France and Germany.
In comparing prices not just of household energy, but also petrol, supermarket groceries and household items, domestic and motoring insurance, personal health insurance, building materials, broadband access, the cost of a new car, local and long distance rail travel, and dozens of other items and products randomely selected, one can't escape the conclusion that we're living in a country who's principal industry is ripping-off customers.
I purposely avoided comparing the cost of buying a house - too barmy!
By my own direct comparison and calculation, it's not just in domestic energy costs that we are being monumentally ripped off in Britain - it's virtually EVERYTHING!
We're living in a country where we're tucked up to the tune of around 30% extra on practically anything you'd like to compare.
Go ahead - try it yourself.
Ronnie Spraggs, Merthyr Tydfil, Wales
My dear English and Welsh,
First of all we haven't got anymore our Energy Industry, we used to be proud of before our government successfully DE-regulated it (in a right way of meaning) or you can read it as: Americanised it or "killed the monopoly" by making it cowboy's looking industry.
Than Centrica bought British Gas, EDF bought Seeboard, Swalec, London Electricity...., RWE bought npower, E-on bought our Powergen etc....... However, Americans, Germans and French although taking profits out of this country, they do not understand that we pushed to Trading arena of Energy business probably the worst managers in whole Europe (including the Eastern Europe), so they would have to invest billions of pounds in training to get a real profit out (one day). But, there our Government jumped in again and allowed them to cover their more than 5000 well-paid but completely useless managers at all levels, by increasing prices as much as they need. So, their top managers decided to rip-us-off.
Bob Vucenovic, Hove,
The regulator OFGEM will not do anything that big business doesn't want it to. The higher echelons of big business and OFGEM executives all attend the same cocktail parties and get togethers, where we all know much off the record business takes place. How OFGEM can consistently ignore price rises, inflated profits, and big business price movements all at the same time is beyond me. They have blamed, increased costs, the dollar, price of oil, transportation and now their cunning new game is regional increases over and above the normal inflated increases. OFGEM like the FSA will do nothing, the government will do nothing, even though the likes of Prescot and Blair have gone. Let us hope that come the election those agrieved consumers remember what Labour has done for the ordinary man and vote them out. Instead of voting the other two main bunches in perhaps we should start a 'Consumer Party' and stand in all parliamentary seats - could people power work?
R.Allely, Cardiff, Wales
No wonder our energy companies are being bought up by foreign buisnesses. When you have such a lazy incompetent regulator and a customer base which has not got much choice, then the pickings should be rich indeed. The whole industry should be the subject of tighter regulation and simple tarrifs that can actualy be understood by the customer, without having to resort to a computer program.
Diddly Do, Liverpool,
I have thought for a long time that gas, water and electricity should be paid for on an increasing scale according to consumption, much that same as we are taxed on our earnings; the more you earn, the more tax you pay. At present the low user is penalised by paying the highest tarrif I know this applies to gas and electricity), justified by the energy suppliers as the initial cost of supply. It is not really an incentive to modify our consumption.
carol, basingstoke, uk
And they told us de-nationalising the utilities would drive prices down because of the competition!
Thalia, London,
As Adam Smith suggested in The Wealth of Nations, "People of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices", and, "The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time altogether. The one is upon every occasion the highest which can be squeezed out of the buyers, or which, it is supposed, they will consent to give: The other is the lowest which the sellers can commonly afford to take, and at the same time continue their business." Seems that things have not changed in Britain for 230 years or so and are unlikely to change, perhaps because most of the energy companies are foreign-owned, US, German or French, and, allegedly, they use UK customers to make increased profits.
Kenneth Armitage, Suffolk, England
In reference to Andrew of Kent's Statement to "nationalise the lot of them". How right he is, the sell off of the public national assets like energy, transport and steel companies was a short term grab for cash that financed the popularity of the government in the eyes of voters drunk on the Thatcherite doctrine of selfishness. Surely we could all see that this wasn't a long term solution and to me a country that doesn't control it's own energy supply doesn't control it's own destiny. Renationalising these vital national assets will allow the government to increase spending on reseach and development and exponentionally improving the nations infrastructure rather than profit taking for the benefit of a few sharholders.
Richard, Cotter, Arkansas
I suffered at the hands of British Gas in the same way as W Wilson of Barnstaple. I was in credit when they informed me they would put up my DD an alarming amount. I phoned and the customer service agent agreed the increase did not appear justified. I told them not to increase the DD but they went ahead and took my money regardless, which I regard as theft. Ofgem were not interested as I had only dealt with it by phone and had not written to British Gas to complain. These companies appear to operate outside the law.
L Mead, London, UK
Andrew of Leicester - you'd be perfectly happy if your mortgage lender met up with its key competitors every other month to decide what mortgage rate it could get away with charging you, then?
Phillip, Birmingham,
Lets not forget that 7% of your gas and electricity bills goes to the government in VAT.
So don`t hold your breath waiting for them to chase after utility companies while they are collecting loads of extra £££££`s for the chancellor.
mike , widnes,
Well, if this was the US, the fact that these guys were ever in the same room together would be prima facia evidence of anti- trust conspiracy, and all would be in the slammer by now. Why not here?
Doug, Glasgow,
I've recently swapped from SWALEC to Npower, which I later found out it was owned by the Germans, on the advice from Uswitch the internet company. Can this Uswitch be trusted or are they in the pockets of the big companies as well?, Anyway, being an ex serviceman I've had it alot worse.
Cheer up the summer's on it's way and it's their turn to win anyway, third time lucky.
Mr Anon Smith.
ANON, Cookoo land, UK
If they have been acting as a cartel in fixing prices then the penalty is 10% of their income for the year. They should also be forced to reduce prices drastically.
Stephen, St. Ives, England
An old French adadge leaps to mind: "It is better to be young, rich and in good health than old and poor and sick."
This ugly crowd of Mafiosi dereg-addicts has proven its case yet again: Nationalise. If the gummint needs a hand, they can have a crowd 5 thousand strong on the doorstep of each BoD within 30 minutes. There'll be feathers, rails and tar, too, on request.
Dion Per Sona, Cardiff, UK,
Let's see if the government can deal with cartels as well as the US does? Since the Nat West 3 fought tooth and nail not to have to face white-coller charges in the US, prefering cosy corrupt UK, I predict the abswer is no.
Eddie Reader, birmingham, england
For me, the truly big scandal here is how little government and watchdogs are doing to protect us. They're the ones we have to look to - and the energy companies' price ripoff is now so longstanding and large, that they should have done something by now. For me, the fairly obvious conclusion - or at the v. least extremely strong question - is that the government must somehow be in on the ripoff and consenting to it. Any thoughts on this, people?
Rafa, London,
"Privatisation will encourage competition and reduce prices to the consumer". Thus rang the mantra of Thatcher's, privatise everything, Britain.
At worst you have collusion between the so-called competitors and at best you have unnecessary mouths in the food-chain.
Re-nationalise them-without compensation.
John Terris, Perpignan, France
Are the regulators always this useless and toothless? Who kept this one quiet this time? Enron nearly bankrupted California, one of the top ten world economies. How long are we going to let these crooks rob us. The banks were forced to give money back for too high charges but fines and refunds are not enough, renationalise them all.
Tom DR, London, United Kingdom
I wonder what the people of the UK would say if they knew that electricity in France is about one third the price in the UK. Perhaps a little disillusion might set in?
Colin , Shrewsbury,
The very existence of the Energy Retail Association should be taken as de facto evidence of a price-fixing cartel. Powerful organisations that met regularly, excluding others and whose common interest is maximising profits from the same products, have to be assumed to be acting in their interests, not those of a competitive market. The price signalling that goes on in this market is incredible and had it been a pan-European industry, the European Commission would have taken it apart years ago, with gigantic fines. Because it is in the UK and the UK regulatory authorities are so craven and weak-willed (typical of bureaucrats who know that the way to rich personal rewards is not to derail the gravy train), we all so suffer, despite having easy access to more energy sources than most of our European neighbours. Our government smiles on monopolies and oligopolies and fails to protect the electorate in favour of these easy money firms, who face negligible risks for their huge returns.
Alan Lowe, Stone,
People like 'Andrew of Leicester in defending these modern 'Dick Turpins', either have a vested interest or have completely missed the point. This stinks of collusion - a cartel, and as such is illegal. Why are not these hikes reflected in the likes of Germany? Energy, like water is essential - and as such should be in public ownership, serving the interests of the public - not shareholders. They should be nationalised.
chris munro, Liverpool, England
Electricity and gas prices move in line with underlying costs. Confused why this article doesn't show how underlying costs have moved vs price changes in the past 24 months! I am certain this will show that the facts don't support the claims of this article. If you want to tell a sensational story, either back it up with facts or start publishing a red top.
Oil has been volatile since Bush and Blair screwed up Iraq, the gas and electricity companies buffer this volatility and pass through to consumers in a sensible way. Sometimes they win sometimes they lose. The only sure winners here are those who own the gas (Russians and Oil Companies).
Also worth noting that red tape and stealth taxes have steadily increased in this sector. Renewable energy is uneconomic without subsidy, and we all pay for this eventually.
Nobody seems suprised to be paying higher mortgages when BoE rates go up, or higher petrol prices when oil goes up, why is gas and electricity any different?
Andrew, Leicester,
This practise is ilegal, the the perpetrators should be brought to justice and Jailed. No point fining those with pockets of money. The more profit these companies make, the bigger the bonuses recieved by the chosen few!!
A point has to be made here to deter other companies (and I'm sure they're are some) from the Intolerable burdon that is put on the general public.
Peter, Pocklington, East Riding of Yorkshire
O look, nobody believes they're getting a good deal in this over priced country, what a surprise. Food prices, house prices, fuel prices, water prices - all up.
Us British have put up with a fleecing for too long and will go on putting up with it. The profits of these companys are just outrageous. What are we going to do about it? Nothing as usual. Free market rocks. Trickle down? Doubtful.
Mark, HH, uk
The energy companies involved have a legal responsbility to put their shareholders first, ie maximising profit. Their customers come a distant second.
Owen, London, UK
If this report is proved to be true , then can we please make sure that we have sufficient prison places available so as to accomodate their respective boards and senior operations officers.
Michael Taylor, Delhi, India
Thia sort of cartel is illegal and needs to be investigated immediately. Any profits generated by such criminal behaviour must be given back to the victims and the companies fined heavily into the bargain. Those individuals who took part in discussions are personally guilty and deserve fining and prison sentences.
Bill Q, Derby,
So in other words they are operating what is known as an illegal cartel. I wonder whether the Competition Commission will issue proceedings against them for this ,or they will ignore it yet again ?.
Whilst writing ,although no enitrely on subject I will broach something that has bothered me for sometime. WHY is it that Electric and Gas Companies can use the Magistrates Courts to enforce what are civil debts against non or slow paying customers ?. It seems that they are using a hangover from the times when the Utilities were National Companies. I would accept that they in cases of danger then they could be able to use such methods ,but it seems that they are allowed exclusive use of the Magistrates to pursue civil debts. Why ?.
If I am owed money by someone can I go to the Magistrates and obtain a warrant to enter the house ?. No of course not.
John, Woking, Surrey
I am with Atlantic Gas & Electric, thier customer service is second to none and I have no compliants about their prices, I switched to them using Uswitch comparison website. In fact they value your business that much that if you pay by monthly ddm they credit you once a year(without having to chase them)one months average payment which is a nice treat once a year. I would certainly reccomend anyone switches to Atlantic if they supply your area.
Andrew Thompson, Eccles Manchester, UK
Unfortunately these 6 utility firms are the 'tip of the iceberg.' The real perpetrators of high energy costs are the Investment Banks who 5 years ago increased the size of their energy trading desks 3 fold. At that time the manipulation of energy markets in the US showed them what they could achieve and now these same banks hold the world's economy to ransom through ramping the oil market which keeps feeding inflation AND critically higher interest rates. Goldman Sachs has constantly called for crude above $100 - guess what, GS is the most profitable bank. Just connect the dots.
Will, Lincoln, UK
I changed to B. Gas 09/07 for gas and elec. by DD. The amount was a total of £65.00. In late Nov they sent the quarterly statement showing I was £50.00 in credit but the DD was to be 'changed' to a total of £97.00 immediately. No explanation for a 50.0% increase! There has been no anouncement of an increase in charges to date. Rest assured I will move for any pittance it is worth to another cartel member when they all anounce the new rates. I NEVER drive anywhere apart from work since diesel went to £1.10-I will switch the gas off and go to bed rather than be bled dry in miserable Britain!
W. Wilson, Barnstaple, UK
How about a windfall tax on their profits?
Richard Madge, Bexhill, East Sussex
I'm sure the government are quite happy with high energy prices.
It generates more in taxation, it helps supports the case for new nuclear generation, and it helps them meet their agreed targets for energy reduction.
Dave, Glasgow,
I thought collusion of this nature between sellers at the expense of their customers is illegal. Is the energy watchdog looking into this?
Hugh, Aberdeen,
The companies are also ripping off customers with the 'standing charge'.
They used to charge a fixed fee of about eight pounds per quarter, then switched to a higher rate for a tranche of the first units consumed.
I have noticed that this 'standing charge' has now reached about 32 pounds a quarter.
This is unnecessary and wholly unjustified.
It is extremely regressive, hitting the poorest consumers the hardest.
Shouldn't charges increase with increased consumption?
John McAllister, Bristol, England
Can't we bring in international competition? The only hope for the ordinary customer - as in other areas - is competition from Eastern Europe, India and China. That will drive prices down to the right levels.
Sammy, Dundee, UK, United Kingdom
A unit of electricity in France costs 0.07 Euro,s in the day and 0.04 Euro's at night. But electricity supplies were deregulated lst year so I fully expect the same thing to happen here, remember one of the largest suppliers in Britain is also the largest supplier in France.
A.Stoffel, Juillac, France,
This sharp (and illegal) practice is stoking inflation. This harms British industry and private energy consumers and prompts the Bank of England to keep interest rates unnecessarily high. Brown & Co. should be absolutely fuming. The Great British Public have suspected that this has been going on for months. Now, thanks once again to the Sunday Times, we have the evidence. It's high time these greedy corporate scammers were named and shamed. Write to your MP's. Demand that punitive action be taken immediately. This is scandalous.
Joe, London, UK
Nationalise the lot of them - all the firms found to be abusing their position should have their licenses revoked and the assets given back to the state. These should then stay there and never be flogged off again.
Andrew, Kent, UK
Name and shame them.
Chris, Essex, UK
Given that the oil (and gas I presume too) are priced in Dollars and the Dollar is VERY weak compared to the ⬠& £ I have been asking why the prices of energy have been going up when they should have been going down or at the VERY LEAST holding around the existing level?
Thus, I suspect the reports of price fixing could very well be true.
Noor Khan, Oxford, UK
The Thatcher greed promotion goes on.
m wilson, bidache, france
And we will continue to be ripped off until our spineless government caps fuel prices. How much does a unit of gas or electricity cost in France?
Sarah N., London, UK