U.K. Probes Biggest Energy Companies on Power to Set Prices

A U.K. probe into the energy market will investigate whether the country’s six biggest utilities use their market power to increase prices.

The Competition and Markets Authority will examine whether low levels of trading of wholesale power create barriers to entry and inefficiencies, it said today in a statement. The six top suppliers are Centrica Plc, SSE Plc, Iberdrola SA’s Scottish Power, RWE AG’s nPower, Electricite de France SA and EON SE.

The authority will probe whether utilities that generate and sell power to homes harm competition because of higher costs or lower supply for companies that don’t have their own output. The inquiry is only considering tariffs for households and small businesses and will publish its final report by the end of 2015.

Regulator Ofgem referred the companies known as the Big Six to the authority last month on lawmakers’ concerns that charges are rising faster than inflation. The opposition Labour Party has pledged to freeze prices for two years if it wins a general election in May.

“The inquiry is only there to diffuse criticism from the opposition in the lead-up to next year’s general election,” Lakis Athanasiou, utilities analyst at Agency Partners LLP, said by phone from London. The likely outcome is a forced divestment of customers to smaller companies, “which would allow the CMA to demonstrate its teeth. This is unlikely to benefit customers and may even increase costs,” Athanasiou said.

The probe must uncover why “overcharging, mis-selling and poor customer service” continued for so long, Tom Greatrex, Labour’s energy spokesman, said in a statement.

“To help people with their energy bills and tackle fuel poverty, the next Labour government will undertake the biggest overhaul of our energy market since privatization,” he said. “Our plans will break up the big energy companies and create a tough new regulator with the power to force companies to cut their prices when wholesale costs fall.”

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