The run-up to this year’s general election was always going to prove a bumpy ride for Centrica (LSE: CNA), SSE (LSE: SSE) and the rest of Britain’s so-called ‘Big Six’ energy providers.
The spotlight on these companies’ behaviour has intensified in recent years as escalating utility bills have sustained the pressure on household budgets. In response to public opinion, Labour leader Ed Miliband took the argument by the scruff in September 2013 by proposing a 20-month tariff freeze should Labour secure victory in May’s run-off.
And politicians have been given further fuel to attack energy companies’ profitability today after the Competition and Markets Authority (CMA) announced that the UK’s major suppliers could have benefitted from their customers’ failure to switch to the tune of £234 a year between early 2012 and mid 2014.
Energy firms the defensive
Indeed, the CMA found that 95% of the major providers’ dual-fuel clients could have saved an average of between £158 and £234 per year by switching their tariff and/or supplier during this period.
And worryingly for Centrica et al, the study found that a third of respondents said that they had not considered changing their energy provider or believed that such a move was impossible. And people in this group were likely to be aged 65 years or over, living in social accommodation, drawing a low income and/or lacking formal qualifications.
Political game heating up
Today’s release has already started the next leg in Westminster’s game of one-upmanship, with the energy secretary Ed Davey telling the BBC’s Today programme that “if the evidence from the CMA is strong that the next step ought to be breaking up a company… we would not flinch from taking that tough action“.
Calls for a break-up of the nation’s biggest companies to massage competition has intensified since the CMA was first asked to investigate the dominance of Centrica, SSE and its peers last summer.
The companies have responded to calls for reduced tariffs by taking the hatchet to their tariffs in recent months, with Centrica cutting its gas prices by an average 5% in January and SSE following suit shortly afterwards by implementing a 4.1% reduction.
But with wholesale costs having slumped by almost a third since last summer the operators have been accused of not passing these savings onto customers. The situation is becoming more and more perilous for the country’s major energy suppliers, and in the current environment the companies will find it nigh-in impossible to impose tariff hikes any time soon, heaping even more pressure on the bottom line.