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Energy Blog Energy Minister: British Gas Could be ‘Broken Up’

Energy Minister: British Gas Could be ‘Broken Up’

Chris Hurcombe
by Chris Hurcombe February 13, 2014
british_gas

Energy Minister Ed Davey has called into question the prices and profits of British Gas this week, suggesting that the company holds a monopoly position that may have to be broken up.Minister Davey laid out a letter to regulators at the start of the week detailing plans to investigate the profit margins and prices of the big six energy firms in the industry. In particular, Davey highlighted British Gas over concerns they hold a monopoly that is causing prices to be artificially inflated.

British Gas hold the largest share of the big six in the UK, with 41% of the domestic supply market. Mr Davey pointed out that the firm charge among the highest prices of the major players in the commercial energy market, with price hikes becoming a worryingly frequent occurrence.

Writing to the Competition and Markets Authority as well as energy watchdog Ofgem Davey outlined the investigation, asking both bodies to look into profit margins and market share.

Should the regulators find any evidence of a monopoly, the energy secretary has asked that any remedy be considered “including a break-up of any companies found to have monopoly power to the detriment of the consumer”.

Mr Davey told the BBC: “This is a significant issue for consumers out there who are struggling with their energy bills” and asking regulators to “think radically”, in respect to a possible break-up, before adding it was “not for a minister” to break up companies.

After the announcement, shares in British Gas’ parent company Centrica fell by 1.7% to 308.9p.

Since Labour leader Ed Miliband pledged to freeze energy prices for 20 months if he were elected, both Prime Minister Davd Cameron and Energy Minister Ed Davey have spent the start of 2014 piling pressure onto commercial energy companies with commissions, investigations and now potential break-ups.

Executive director of the consumer rights group Which?, Richard Lloyd, labelled the progress made in the last three months as “hugely significant”, saying that the structure of the largest energy companies is at least partly to blame for the increase in prices.

Lloyd was also praised the investigation into British Gas, saying “It will now put huge pressure on the regulators, in a matter of weeks, to announce that they’re taking the first steps towards potentially breaking up the very biggest of the big energy companies,”.