by Brendan Coyne
Ofgem has insisted it has the tools to tackle predatory pricing. The regulator was responding to a report from the Institute of Public Policy Research (IPPR) that asserted the big six energy firms still offer loss-leading tariffs subsidised by those that do not switch supplier.
The IPPR tested big-six tariffs across various payment types and locations using a price comparison site. It found Scottish Power to offer the highest price differential at more than £330, followed by Npower, British Gas, SSE and EDF. It recommended Ofgem give an update on its investigation into Scottish Power, launched in March 2011, over whether it has breached rules on tariff cost reflectivity.
SSE disputed the report’s suggestion. It said it had the lowest price differential of all major suppliers.
The report also said Ofgem’s own data suggested major suppliers were either not being forced to be more efficient, implying market failure, or that Ofgem had not accurately captured their operating costs and efficiency savings. That would mean the regulator’s estimates of supplier profit margins were too low, said the IPPR.
The report, commissioned by small supplier Ovo, called for Ofgem to crack down on predatory pricing, define measurable aims for retail market reform (RMR) and set a timetable to gauge progress. It should be a last chance to improve competition, said IPPR, and government should intervene if it did not work.
Ofgem said RMR should make it easier for consumers to save and for new entrants to enter the market. It said it will consider referring suppliers to the Competition Commission if its reforms are not heeded but did not say how long it would give suppliers to respond.
This article first appeared in Utility Week’s print edition of 4 May 2012.
Get Utility Week’s expert news and comment – unique and indispensible – direct to your desk. Sign up for a trial subscription here: http://bit.ly/zzxQxx