Centrica’s Breakup Floated by U.K. Minister

Energy Secretary Ed Davey has written to U.K. regulators, asking them to look at whether Centrica Plc (CNA)’s British Gas arm was too profitable and should be broken up.

Centrica shares fell as much as 3.7 percent. They were down 2.8 percent at 305.5 pence at 8:14 a.m. in London.

“It looks like there could be a problem in the domestic gas supply market,” Davey told BBC Radio 4 today. “I want them to think radically: it’s an independent process –- they can choose to take no action or to take a full scale market investigation, and as I set out in my letter there could be a number of remedies if they go down that route, including the break-up of some of these companies.”

In his letter, Davey said that British Gas, which used to be the state-owned monopoly supplier and has the largest share of the market, “has tended to charge one of the highest prices over the past three years, and has on average been the most profitable.” He said a reduction in gas profit margins to the level seen by electricity suppliers would save households an average 40 pounds ($66) a year.

Utility costs have been at the top of the U.K. political agenda since September, when Ed Miliband, leader of the opposition Labour Party, pledged to freeze prices for 18 months if he wins the May 2015 election. Labour has been ahead in the polls since April 2012.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.