Energy firms ‘conspire to raise prices’

4.5 million families struggling to pay fuel bills, says select committee
Robin Pagnamenta

Energy companies stand accused today of overcharging customers, leaving millions of households struggling to pay gas and electricity bills.
A report claims that the six biggest energy companies conspire to keep charges artificially high and gives a warning of widespread hardship this winter unless the Government acts.
It also accuses the industry regulator of failing to protect the interests of customers and calls for an immediate overhaul of the way gas is traded, amid concern that speculators are making huge profits at the expense of hard-up consumers.
The damning report by MPs, published today, urges ministers to redouble efforts to alleviate the plight of families plunged into fuel poverty before the winter. The number of families who struggle to pay heating bills has risen to 4.5 million from just over two million in the past five years.

The report comes just two days after the French company EDF announced price increases of up to 22 per cent for its five million customers. Other energy companies are about to follow.
MPs on the Commons Business and Enterprise Committee stop short of accusing companies of rigging prices. But Peter Luff, who chairs the committee, said: “Just because we have found no evidence of collusion does not mean we have given the ‘Big Six’ energy companies a clean bill of health - far from it.
“It is clear that there are very real problems in the energy markets at all levels, and going beyond these six companies, which need to be addressed.”
British Gas, npower, Scottish Power, E.ON and SSE, as well as EDF, - are accused of operating in a cosy world of minimal price competition. This created an environment where it was “easy for those players to make informed judgments about the behaviour of their competitors. This alone can distort competition without any actual collusion occurring.”
Business was also put at a serious disadvantage to its international competitors. “Industrial consumers now face prices above European levels,” it said. “If these price differentials are sustained, they will put many thousands of jobs in manufacturing at risk.”
Specific concerns included Britain’s acute shortage of gas storage - only 13 days’ worth compared with 99 days in Germany and 122 days in France.
Mr Luff said this represented a “pathetically inadequate level of gas storage” that left Britain’s energy market inherently unstable.
He pointed out that the shortage was contributing to the volatility in wholesale gas prices, in particular because the depletion of the North Sea meant that Britain was increasingly dependent on imported gas, which required temporary storage.
About 40 per cent of the gas used in Britain will be imported this year, up from 27 per cent in 2007. That proportion is expected to rise to 75 per cent by 2015.
The report said that the Government had failed to respond quickly enough to the “increasing and entirely predictable gas import dependency”. More storage capacity was an issue of “national importance and should be a high priority in domestic energy policy”.
It also noted that continuing consolidation in the industry threatened to choke off competition further and, in particular, gave warning that the imminent £11 billion takeover of British Energy by EDF threatened to create an overly dominant player, which would add to the upward pressure on pricing.
“I’m not against the sale of British Energy per se but you just can’t sacrifice further competition like that without the creation of robust safeguards,” Mr Luff told The Times. He called for both Ofgem and the Competition Commission to look “very carefully indeed” at the proposed deal.
The report cited the lack of price transparency and liquidity in the forward market for gas as a key area of concern. “We recommend that Ofgem investigates urgently why gas producers seem unwilling to trade in the forward market,” it said.