UK competition watchdog to probe Big Six energy suppliers over collusion

The UK's top competition watchdog would  investigate whether loyal customers were being exploited by the Big Six energy suppliers who were ''tacitly colluding'' over energy price rises, The Telegraph reported.

The Competition and Markets Authority (CMA) today highlighted a raft of issues about the UK energy sector as it launched an 18-month investigation that could result in breaking up the Big Six suppliers.

Its probe would focus on why the six former monopoly energy suppliers – British Gas, SSE, ScottishPower, E.On, EDF and Npower – continued to dominate the supply market, over 14 years since privatisation, with large numbers of customers not switching. It would consider ''how suppliers might exploit and influence the behaviour and perceptions of customers to their advantage''.

The watchdog would consider why retail prices continued to rise, including ''to what extent such price changes seem to be associated with changes in wholesale costs'', and whether ''tacit coordination'' between the suppliers affected their decisions.

The watchdog would consider the evidence that retail suppliers were tacitly coordinating, in adopting strategies and behaviours to their mutual advantage.

According to Roger Witcomb, chair of the Energy Market Investigation Group, given the importance of energy supply to households, businesses and the economy, it encouraged submissions on the issues it had identified and whether these covered the areas it needed to investigate.

Meanwhile, the CMA today published a report into the country's energy markets in which it identified opaque pricing, the dominance of utilities and an uncompetitive retail market as the main negative factors, Reuters reported.

The so-called issues statement forms part of an investigation into the British energy market, one which the CMA would publish in its final report by 25 December 2015.

According to the CMA statement, it had identified "four candidate theories of harm" that explained how market characteristics were adversely affecting competition.

Firstly, opaque pricing and low-level liquidity in wholesale power and gas markets created  discouraged entry in retail and generation.

Secondly, vertically integrated electricity companies harmed the competitive position of non-integrated firms hurting customers.

Thirdly, market power in electricity generation led to higher prices.

Finally, according to the CMA, energy suppliers faced weak incentives to compete in retail markets, due in particular to inactive customers, supplier behaviour and/or regulatory interventions.