Government ministers have warned regulation authority Ofgem that if it does not shake up the energy market, so that the 6 major energy firms are no longer in full control, they could be scrapped.
There have been revelations that the profit margins by the 6 major energy companies are extremely high, mainly due to major energy suppliers constantly raising the cost of energy bills to make a larger profit for themselves.
Ofgem was originally set up as an independent advisor to help the average consumer ensure they are not being ripped off by large energy companies. However government sources have advised that Ofgem has become too close to large energy prices, and are neglecting the consumers needs in the process. Ofgem’s main aim is to reduce the risk of energy companies overcharging customers and regulating energy bills, however this has been somewhat neglected, and the time has come for action.
There is a need for more energy suppliers in the market to bring healthy competition and reduce the amount of profit being made by these larger companies through back door methods. The energy firms are insistent that they have a very minor profit margin, hence the need to increase prices. However sources are adamant that these companies are transferring a sum of the profits to ‘wholesale arms’ to hide the excess.
Richard Lloyd the Executive Director of independent review service ‘Which?’ has said that we “need radical solutions to improve competition and keep prices in check”. Curbing the profits made by the main suppliers who have made huge amounts from the rising cost of energy bills will encourage smaller energy suppliers to compete, and ultimately provide lower prices for consumers.
According to officials, this is the last chance for Ofgem to improve before the government intervenes. This could mean the control and regulation of energy bills will then be the responsibility of the Department of Energy and Climate Change. The secretary of climate change, Caroline Flint has advised that the shakeup is long overdue; this supports a statement from an unnamed senior official who advised that “Ofgem are a nightmare. They keep Government in the dark about what they’re doing and then spring things on us at the last minute”.