Energy price probe launchedOfgem investigation follows series of price hikes

22 February 2008

A blue flame from a gas hob

Although there is no 'green gas', you can still switch your energy supplier to a green tariff

An investigation into the UK's electricity and gas markets has been launched by the regulator in the wake of growing customer concern.

Ofgem's inquiry follows a series of inflation-busting price hikes announced recently by big energy firms.

The regulator has no strong evidence of failure in the gas and electricity market.

But it said recent events had damaged public confidence.

Last month Ofgem quashed allegations that energy suppliers were involved in price fixing.

Anti-competitive

The regulator today repeated its view that there is no evidence of such activity.

But it urged anyone with evidence of anti-competitive behaviour by gas and electricity firms to come forward.

Its investigation will include the relationship between retail and wholesale energy prices.

UK gas and electricity firms have blamed their recent price hikes on soaring wholesale costs.

The regulator will also investigate the barriers to customers trying to switch energy supplier, and the different switching rates among customers on online, dual fuel, single fuel and pre-payment tariffs.

Switching rates

Energywatch recently described price hikes introduced by five of the big six energy firms as 'depressingly similar'.

The watchdog said the increases left a difference of just £13 per year between the rival suppliers for the average household paying by direct debit for dual fuel.

Ofgem chief executive Alistair Buchanan said the regulator would investigate how changes in the global energy market was affecting UK energy bills.

'We, of course, keep the market under constant surveillance but to date we have seen no clear evidence that the market is failing,' he said.

'Nevertheless, recent events in the market have increased public concern and have damaged customers' confidence that competition is working well and giving them a good deal.

'Customer confidence is vital for a well-functioning market.

'So we shall replace our magnifying glass with a microscope and take a more detailed look at the retail market and the influence of global wholesale market developments.'

Online deals

Ofgem will investigate whether the current system works well for all energy customers - not just those on the cheapest online deals.

The regulator is already looking at tariffs for prepayment customers and those who do not pay their energy bill by direct debit.

The inquiry will be carried out under Ofgem's Enterprise Act powers, with its initial findings due to be published before the end of September.

Ofgem could decide to refer the whole UK gas and electricity supply market to the Competition Commission.

The European Commission will collaborate with Ofgem's investigation to provide information on other European energy markets.

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