Davey calls for gas company profits investigation

The energy secretary, Ed Davey, has written to regulators Ofgem and the CMA (Competition and Markets Authority), urging them to examine the profits made by the Big Six energy companies in Britain, which include British Gas, EDF Energy, npower, E.ON UK, Scottish Power and SSE.

Speaking to the BBC, Davey revealed that figures suggested big problems when looking at the profits made on gas supply.

Looking at the big six overall, Davey said: “The average profit is 6.7%, more than three times the average profit on domestic electricity…Two companies seem to be making five times the typical profit on supplying electricity.”

Households could see savings of up to £40 a year, Davey believes, if profit margins for gas were to drop to a similar level as electricity.

Davey singled out British Gas in his letter, claiming that the company have the highest prices.

“British Gas has tended to charge one of the highest prices over the past three years, and has been on average the most profitable,” he said.

If regulators do decide to investigate, this could lead to the break-up of British Gas.

“They could decide to take no action or they could decide to go for a full-scale market investigation,” which could lead to the breaking up of some of these companies “if they have been shown to abuse their market power,” Davey told the BBC’s Today programme.

In his letter, Davey also suggested introducing new business models, which include promoting energy efficiency, “one of the most effective ways to reduce our carbon emissions.”

A spokeswoman for British Gas said: “Further discussions have been arranged over the coming weeks in which we will fully participate.”

 The executive director of Which?, Richard Lloyd, said: “The pressure is now on regulators to announce next month that they are taking the first steps towards a more radical reform of the energy market, and to give consumers confidence that they are paying a fair price.”

Vanessa Smart