Kiran Stacey Under-fire UK energy companies play for time

This morning’s clampdown by the UK regulator on the country’s big six utilities was unexpectedly hard-hitting.

Apart from the news that the companies may be forced to auction up to 20 per cent of their electricity generation output, there was the harsh tone struck by the regulator’s chief executive, Alistair Buchanan. He said:

Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market.

Consumers might be forgiven for remaining cynical about the likely chance of success: they have seen bills rise steeply in recent months, effectively cancelling out the modest drop in prices seen over the recession.

But Ofgem’s findings seemed to have taken the industry itself by surprise. The comments released by the energy industry’s representative body, Energy UK, are little more than playing for time. Their director Christine McGourty said:

Energy companies will be examining Ofgem’s findings carefully and will work closely with the regulator to ensure that the  market is working effectively for consumers in every way possible. Britain has one of the most competitive energy markets in the world, with among the cheapest gas and electricity prices in Western Europe and around 100,000 customers  switching supplier every week.

But some people have never switched, so any appropriate measures to engage those customers better in Britain’s competitive energy market will be welcome. In response to customer demand, there is now a wide range of energy products available – such as green tariffs and fixed tariffs – to meet the diverse needs of different customers. If energy companies are not setting out these options clearly enough then this is something that should be addressed.

Energy companies will continue to do everything possible to serve their customers well, and keep prices as low as possible. Companies will now be looking at Ofgem’s proposed reforms in detail and respond to the consultation fully in due course.

Investors also seem to be taking the news seriously: utilities were near the bottom of the FTSE100 on Monday morning. Centrica was down 0.4 per cent in an otherwise rising market.