On the 10 February 2014, the UK Secretary of State for Energy and Climate Change, Ed Davey, called for the market share and profit margins of the UK’s largest gas suppliers to be investigated. Mr Davey suggested that the fact that the largest 6 gas companies have an average profit margins of around 6% in gas supply whilst their electricity supply operates at a margin of under 2%, must be investigated. He singled out British Gas in particular due to their profit margin of 11% and their market share of over 40%.
Mr Davey went so far as to say that regulators could look to break up large companies such as British Gas to stimulate competition in the market and encourage lower prices for consumers. Whilst the share price of Centrica, the owner of British Gas, took a predictable tumble on the announcement from a member of Government, others have been more sceptical of Mr Davey’s call and questioned the economic benefit to consumers of artificially breaking up supply in the market.
The politically sceptical amongst our readers may be dismayed at the announcement as evidence of competition law and regulators being used for a second time by politicians looking for public favour. Recently we reported how Labour, the main UK political opposition, were considering breaking up the UK’s largest banks if they came to power. This latest announcement by Ed Davey shows a similar intention with an attack on market share, profits and the perceived lack of competition in the market.
It remains to be seen in the coming election year whether the CMA, the new UK competition regulator will be come under increasing pressure from politicians of all parties to investigate particular markets or industries. Regardless of this increased political role, it seems competition regulators will likely remain in the UK headlines for some time to come.