Yahoo Finance Energy: Big Six Profit From Switching Failure
A competition inquiry into the energy market has found suppliers routinely charging loyal customers up to £234 more per year.
The Competition and Markets Authority's (CMA) update on its continuing probe into the sector also contained criticism of the energy regulator's powers - as reported by Sky News on Tuesday evening - saying excessive regulation at Ofgem may be creating barriers to new market entrants.
The key finding in the CMA's updated Issues Statement for consumers concerned the power of switching supplier, with the regulator declaring that long-term customers - many deemed vulnerable - were paying a higher price for failing to move between energy companies.
It said 95% of dual fuel customers of the so-called big six suppliers could have saved an average of between £158 and £234 a year by switching.
It found British Gas, SSE (LSE: SSE.L - news) , Scottish Power, E.ON, npower and EDF (Paris: FR0010242511 - news) , earned 12% more from a customer on a standard - instead of fixed - dual fuel tariff.
The report stated: "The evidence that we have seen to date also suggests that the gross margins that the six large energy firms earn are higher for customers on the SVT (Standard Variable Tariff) than for those on non-standard tariffs over the last three years."
While the Issues Statement does not contain any formal conclusions by the CMA, the ongoing designation of industry regulation as a key focus will embarrass Ofgem at a time when its leadership is under intense political pressure.
Labour has vowed to freeze prices for 20 months if it wins the General Election in May, a pledge which sparked fury among big six suppliers.
They recently cut standard gas tariffs by up to 5.1% in response to a 30% dip in wholesale prices but argue raw energy makes up less than 50% of a bill and they have to pay up to three years up front for their supplies.
They point to the growing cost of green levies and network costs.
Crucially for the big six suppliers, the CMA found that their average profit margin across gas and electricity was 3.3%, with gas being the more profitable of the two.
But the report questions whether the market is working for consumers as almost half of households have been with the same supplier for more than 10 years.
This week, the Government launched a campaign with the slogan "Power To Switch", which is designed to encourage consumers to shop around to find cheaper energy deals.
Provisional findings of the CMA's inquiry will be published in May.
It is expected to stop short of recommending that the big six firms split their generation and supply arms - as some critics have demanded - to give greater clarity on profits.
Energy UK, the industry body which speaks for suppliers, said: "The energy industry continues to support the work of the Competition and Markets Authority and has already introduced a range of voluntary measures, moving towards greater openness and transparency.
"Today is the next stage in the process with conclusions expected later this year.
The industry will review today's releases over the coming weeks with a view to engaging further with the investigation. Individual members will be able to contribute to the debate as the rest of the investigation progresses."
