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Minister says British Gas may be split due to pricing
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British Gas may be broken up to put a stop to excessive profit margins charged by Britain’s biggest gas supplier, Energy Secretary Ed Davey said yesterday, responding to an energy sector review by regulators.
Soaring energy costs have become a big political issue in Britain since opposition Labour leader Ed Miliband said in September he would freeze consumers’ bills for 20 months if he wins the national election in 2015.
“There is evidence that British Gas, the company with the largest share of the gas domestic supply market, has tended to charge one of the highest prices over the past three years, and has been on average the most profitable,” Davey said in a letter dated February 9 to the head of Britain’s energy regulator Ofgem.
Ofgem, the Office for Fair Trading and the Competition and Markets Authority are carrying out an investigation into competition in Britain’s energy retail market, whose top six players are Centrica, SSE, EDF, RWE npower, E.ON and Scottish Power.
Centrica shares fell 3 percent to 305 pence (US$5) yesterday.
Analysts said gas supply margins cited by Davey were not new.
“Mr Davey’s letter, no doubt intentionally, raises the political temperature once again around UK energy supply. It is very difficult for investors to price in political risk for UK utilities at this time,” Liberum Capital analysts said.
The government started an annual energy market competition investigation last year. The first report conclusions are due next month.
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