On 21 February 2008, Ofgem announced that it would be launching an investigation into the markets in electricity and gas for households and small businesses. In response to mounting consumer and public concern over the competitiveness of the market for gas and electricity, and as part of our work on behalf of customers, we plan to investigate a range of aspects of the GB retail energy markets.
The energy supply markets probe will involve in-depth examinations of market structure, price developments, consumer and competitor behaviour in different segments of the markets serving domestic customers and small businesses. This will enable Ofgem to explore further whether the interests of consumers are being well served.
Specifically, the investigation will cover:
- The customer’s perspective and experience of the market including access to information and barriers to switching suppliers;
- Suppliers’ market shares, switching rates for different groups of customers (such as online, dual fuel, single fuel and pre-payment);
- The competitiveness of suppliers pricing the different market segments and customer movement between payment types as well as suppliers;
- The relationship between retail and wholesale energy prices; and
- The economics of new entry and the experience of companies trying to enter the energy market.
On 26 March 2008 we published a Call for Evidence letter inviting all market participants and other interested parties to comment on a number of aspects of the energy retail markets and to provide evidence supporting these comments. In addition to information collected as part of this Call for Evidence, we will gather data and information from market participants using Ofgem’s formal information gathering powers under the Enterprise Act 2002.
In addition, we will undertake consumer research into customers’ experience of the gas and electricity retail markets and their ability to exercise choice. This will include incorporating the findings of recent consumer research which we have undertaken as part of the Consumer First project.
We will also be holding a Fuel Poverty Summit on 23 April 2008 which will be chaired by Lord Mogg, the chairman of Ofgem’s governing Authority. The summit will focus on issues affecting vulnerable customers’ access to better choices in the gas and electricity markets and the extent to which this group of customers is benefitting from competition.
The deadline for responding to the Call for Evidence is 30 April 2008. Ofgem plans to report on its initial findings from the investigation in September 2008. Here we will set out our conclusion on what course of action, if any, should be taken going forward.