UK Energy Secretary Questions Legitimacy of British Gas’ Profits

UK's Energy Secretary Ed Davey addressed a letter to regulators asking for more transparency in the national energy market. He also asked additional information about the benefits of an increased integration with other European markets. 

“I also would like you to examine whether there would be any merit in further gas pipeline interconnection with Europe… Would further gas pipeline interconnection help to drive down gas wholesale costs?” the Energy Secretary wrote to Ofgem on Sunday.

Questioning the efficiency of the British energy market, Davey argued that big utilities' profit margins are too high. He also spoke about possible solutions “including a break-up of any companies found to have monopoly power to the detriment of the consumer.”

“The gas market has little vertical integration and analysis of the profit margins of the energy companies shows that the average profit margin for gas is around three times that of electricity. For some companies the profit margin is actually more than 5 times the average profit being made on supplying household electricity,” Davey wrote. 

British Gas, which was mentioned in the letter, answered with a statement by Chris Weston.

“Britain has one of the most competitive energy markets in the world, with gas and electricity prices among the lowest in western Europe.  Around 80 per cent of British Gas customers have switched their tariff or supplier at least once,” Weston answered in the note released on Monday.