UPDATE 1-UK to strengthen energy regulator Ofgem

Tue Sep 20, 2011 7:30am EDT

Related Topics

* Energy suppliers to lose chance to delay Ofgem rulings

* Consumers to be able to switch supplier more quickly

* Minister wants investigation into predatory pricing

By Tim Castle

BIRMINGHAM, England, Sept 20 (Reuters) - Britain will boost competition in its energy supply sector by strengthening the hand of regulator Ofgem and forcing suppliers that breach regulations to reimburse consumers directly, energy minister Chris Huhne said on Tuesday.

Energy companies will no longer be able to delay Ofgem rulings by up to a year by forcing the independent regulator to seek a second opinion from the Competition Commission.

Instead, Ofgem will be able to proceed directly with its decisions, with companies having a right of appeal, according to advance extracts of a speech by Huhne to his Liberal Democrat Party at its annual conference.

"We are determined to get tough with the big six energy companies to ensure that the consumer gets the best possible deal," Huhne said.

Britain's six largest utilities are German groups E.ON (EONGn.DE) and RWE , British companies Centrica and Scottish and Southern Energy , French operator EDF and Spanish firm Iberdrola .

All have raised prices in recent months, putting pressure on the government to ease the pain for consumers paying 20 percent more, on average, for energy than a year ago, according to comparison website USwitch.

Huhne said Ofgem should investigate whether small companies were being kept out of the market by the larger firms' pricing practices, with some making "cut-throat" offers to new customers while keeping existing consumers on higher tariffs. "That looks to me like predatory pricing. It must and will stop," he said.

The government will also consider giving Ofgem the power to require energy companies to pay refunds to consumers directly or to funds that benefit customers when they breach licence terms.

At present, fines go direct to government coffers for general spending.

Customers will also be able to switch suppliers more quickly and officials will work on plans to allow organisations such as housing associations to switch hundreds of tenants at a time to cheaper energy companies, Huhne said.

E.ON UK chief executive Paul Golby said the government was attacking the wrong target at a time of rising world energy prices. "Blaming energy companies in Britain for global energy costs is not productive. As just about all industry commentators have said, the age of low price energy is over."

Evolution equities analyst Lakis Athanasiou said while the moves would put pressure on profit margins, they would only have a "mild bearish impact" on Centrica, the dominant player and home to the British Gas brand.

"There is very little that encouraging switching will do to reduce residential tariffs, and increased switching may even drive up supply operating expenses, putting upward pressure on prices," Athanasiou said. (Additional reporting by Rosalba O'Brien and Sarah Young in London; Editing by Dan Lalor)

FILED UNDER: