The coalition has unveiled measures it says will knock £50 off the average energy bill, but some of that cost will be absorbed by taxpayers.
Energy firms criticised for 'losing public trust'
Energy Secretary Ed Davey is walking an uncomfortable line by hitting out at the same firms he needs to improve our energy infrastructure.
The MD of British Gas has issued a fresh statement in response to Energy Secretary Ed Davey's letter to Ofgem in which the Cabinet minister called on the regulator to probe 'Big Six' gas profits as part of an investigation across the industry.
Chris Weston said its parent company Centrica "does more than any other organisation to secure gas and power for British customers, with commitments totalling more than £60 billion, and we can only shoulder responsibilities on this scale if we are a profitable business". He added:
In the last six years we have invested £13.7 billion, which is equivalent to £1.85 for every £1 earned. We also support jobs and growth in Britain, directly employing more than 30,000 people. Our annual tax bill is around £1 billion, making us one of Britain’s biggest corporate tax-payers.
The current assessment of the energy market will be essential to rebuilding trust in the sector. We strongly support a proper, thorough and independent examination of the issues during this process.
Energy Secretary Ed Davey has been accused by a leading trade union official of sparking a "witch hunt" against energy firms and threatening jobs by pursuing a vast investigation into the 'Big Six' energy companies and their profits.
Gary Smith, the national officer of the GMB union, was angered that British Gas, in particular, had been singled out by the Cabinet Minister in his letter to the energy watchdog Ofgem. Mr Smith said:
British Gas is probably the biggest employer of apprentices and trainees in the UK. Hundreds of apprenticeships in smart metering that would have been created this year probably won't be because of Davey's dithering over policy.
He now threatens to wreck thousands of more jobs. If an investigation is warranted it should have been carried out appropriately not by a ministerial leak to the press leading to a witch hunt.
Mr Davey's intervention was welcomed, though, by the Federation of Small Businesses, whose national chairman, John Allan, said:
Over 40% of all small businesses are with British Gas and it simply cannot be right that one company has such a dominant share, especially given the price of gas now accounts for between five to 10 per cent of total business costs for nearly one in 10 of the UK's smallest businesses.
The business energy market is in desperate need of reform and we want to see radical measures put in place to increase transparency in the market and allow small firms to switch to more competitive energy deals with ease.
British Gas has said it will "participate fully" in discussions about gas profits after being singled out by the Energy Secretary in his call to the industry watchdog to examine the 'Big Six' energy companies.
Ed Davey said in a letter to the head of Ofgem that British Gas had tended "to charge one of the highest prices over the past three years, and has been on average the most profitable".
British Gas issued the following statement in response:
There is an ongoing independent market assessment being conducted by the OFT (the Office of Fair Trading), Ofgem and the Competition & Markets Authority.
We welcome this and have complied with all the requests for data which we have received.
Further discussions have been arranged over the coming weeks in which we will fully participate.
– British Gas
The data referred to in the Secretary of State's letter has already been fully disclosed and in the public domain for a number of months.
We share the Secretary of State's wishes to see greater interconnection between the UK and other European energy markets and we also wish to see European markets open up to full retail competition.
British Gas has also fully embraced the Green Deal which is already beginning to have a positive impact in reducing consumer bills.
Energy secretary Ed Davey has pointed to the "lack of transparency" in the accounts of the "Big Six" energy firms as to why he has urged the industry regulator to investigate their profits.
Shadow energy and climate change minister Jonathan Reynolds accused Ed Davey of spending months defending energy firms despite evidence of overcharging.
– Shadow energy and climate change minister Jonathan Reynolds
Actions speak louder than words - and this Government has let the energy companies get away with increasing their profits on the back of spiralling bills for hard-pressed consumers.
If the Government wants to be taken seriously on energy bills, nothing less than a price freeze and action to stop these firms from overcharging in the future, as Labour has proposed, will do.
Energy Secretary Ed Davey has urged Ofgem to look at the profits made in gas by the 'Big Six' energy companies:
– An extract from Ed Davey's letter to Ofgem
Clearly you will wish to consider whether this is prima facie evidence of an issue in the market and so whether it merits a market investigation reference with the whole gamut of potential remedies that could follow including a break up of any companies found to have monopoly power to the detriment of the consumer.
Alternatively you may of course conclude that no action is needed or potentially some intermediate measure which can be taken by the sector regulator.
Mr Davey's letter also suggests looking at whether the Big Six should adopt a different business model and how well British energy markets are linked to those in mainland Europe.
Ofgem said it would look at all evidence while compiling its report with the CMA and OFT. It declined to comment further.
Energy Secretary Ed Davey has urged the energy regulator to look into the profits being made by the 'Big Six' energy companies made through supplying gas.
The Liberal Democrat urged Ofgem to examine whether their profit margins - in some cases five times higher for gas than for supplying household electricity - should be the subject of an investigation.
If such an investigation was to find evidence of a monopoly, it could result in a company being broken up.
Davey claimed gas made up two-thirds of the energy bills of households connected to the grid and that if profit margins for gas came down to a similar level to those in the electricity market it could save every household £40 per year.
The recommendation came in a letter to Ofgem chief executive Andrew Wright, in which Mr Davey singled out British Gas.
He said there was evidence the company, which has the greatest share of the domestic gas market, had tended "to charge one of the highest prices over the past three years, and has been on average the most profitable".
Energy Secretary Ed Davey told ITV News the Government will "seriously investigate" launching a three-digit phone number for people who lose power during severe weather events to get up-to-date information.
Following a meeting with energy distributors, Mr Davey said he was "confident" they had worked as hard as they could to reconnect homes and businesses over the Christmas period.
Despite praising the firms, he added, "We are really clear there are things that could have been improved, done have been done better, so we have agreed that there will be a review that we will lead over the next two months .... to look at issues like communication".
Energy Secretary Ed Davey is due to meet representatives of power distribution companies later today to discuss the power outages over the Christmas period.
More than a million homes and businesses were cut off over the entire period, including 100,000 on Christmas Eve.
Last week, the energy regulator Ofgem has told ITV News that power networks could face fines if it is proved that they failed to respond quickly enough to reconnect customers.
Energy Secretary Edward Davey called E.ON's price rises announcement "disappointing news".
Bur Mr Davey stressed:
This rise is ... lower than it would have been as a result of Government action to reduce the impact of price rises on consumers.
As part of their announcement today, E.ON have confirmed they will pass on these savings to their customers.
This does not let energy companies off the hook.