Energy firms facing price review

Ofgem has previously said the energy market is competitive

Ofgem is to investigate recent energy price rises as it said they have significantly widened suppliers’ profit margins.

The watchdog said that the net profit margin of £65 per typical customer in September was now £90, a 38% rise.

The calculations take into account price rises announced by three of the “big six” suppliers in recent weeks.

Ofgem will now review the domestic energy market to see if more action is needed to protect consumers.

A previous investigation of the market in October 2008 found no evidence of anti-competitive behaviour in the sector.

The work will be completed by March 2011, and will study the “effectiveness of the retail market”.

The regulator said it was asking if “companies are playing it straight with consumers” after the latest figures showed a 38% rise in profit margins from the typical dual-fuel customer in the last three months.

“The energy retail market can only be fully effective if consumers have confidence that the market is transparent and easy to take part in,” said Ofgem chief executive Alistair Buchanan.

“So we will go beyond our usual quarterly reports on prices and do a comprehensive review of the retail market and our recent reforms from the consumers’ perspective.

“Greater transparency in the market is good for consumers, investors and for the energy industry as a whole.”

Last week Scottish Power said its customers’ electricity bills would rise by an average of 8.9% while prices for gas customers would increase by an average of 2%.

This came after Scottish and Southern Energy said it would put up its domestic gas tariffs by 9.4% at the start of December.

British Gas customers also face a 7% rise in gas and electricity bills this winter.

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