Energy regulator Ofgem has called for a full-scale inquiry into the UK's energy market, amid allegations of price fixing and suppressed competition.
After years of rising prices and soaring profits, the Big Six energy companies will now be investigated for the first time and Ofgem is warning that they could be forced to break-up.
The companies have responded robustly denying allegations of a "cartel" after Ofgem found evidence of "tacit co-ordination" between them.
Ofgem says the inquiry will "remove uncertainty from the market" and would "once and for all clear the air" and make sure there were "no further barriers to effective competition."
Ofgem said the retail profits of the Big Six have increased from £233 million to £1.1 billion in the past three years, with "no clear evidence" of companies becoming more efficient. It wants the new investigation to look into several key areas of concern:
- Customer trust
- Entry barriers for newer businesses
- Possibility of tactic co-ordination between companies
Centrica announced today plans to build a new gas fired power station in England would be put on hold until the investigation is complete. Chief Executive Sam Laidlaw said:
Anything that clears the air and helps rebuild trust in the industry must be a good thing. Britain's energy market is highly competitive and we believe that a full independent review by a respected regulatory authority would demonstrate precisely that.
Whilst MoneySavingExpert.com founder Martin Lews welcomed the investigation, but said it was "very, very" overdue.