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British Gas Profits Questioned by Energy Minister


Profits posted by British Gas have been questioned by the energy minister, Ed Davey, who has further suggested the company may have to be broken up if proof of a monopoly is found.

In a letter to regulators, Davey said that profits made by “the big six” energy firms were higher than originally thought and suggested a market investigation should be conducted, pointing out that British Gas, who currently hold 41% of the domestic gas supply market have been charging amongst the highest rates.

In the letter, Davey called on regulators to study the dominance of British Gas asking them to consider all possible remedies "including a break-up of any companies found to have monopoly power to the detriment of the consumer."

The timing of the comments is particularly important as the first annual competition review into the energy sector is to begin next month, meaning regulators could be under pressure to take the comments into consideration.

However, one unnamed energy firm complained to the BBC, arguing that the energy secretary was interfering in what should be an independent review.
Additionally, British Gas defended their profits by arguing: "The data referred to in the Secretary of State's letter has already been fully disclosed and in the public domain for a number of weeks."

"About two thirds of British Gas customers are dual-fuel customers, taking both gas and electricity, and the price of the gas is the same for all customers whether they are a gas-only customer or on a dual-fuel tariff. British Gas' profit margins are on average 5% after tax."

"Our parent company Centrica does more than any other organisation to secure gas and power for British customers, with commitments totalling more than £60bn, and we can only shoulder responsibilities on this scale if we are a profitable business."

The cost of energy has been a big debate in recent months after “the big six” energy firms increased their prices at above inflation rates, stating reasons such as increased whole sale prices. This led to the government changing its green levies policy in a bid to persuade energy suppliers to cut their prices.

Ed Miliband, however, has pledged to fight rising energy costs by freezing energy prices for 20 months if he were to be elected in the next general election.

Jonathan Reynolds, shadow energy and climate change minister, said: "This government has let the energy companies get away with increasing their profits on the back of spiralling bills for hard-pressed consumers.

"If the government wants to be taken seriously on energy bills, nothing less than a price freeze and action to stop these firms from overcharging in the future, as Labour has proposed, will do."

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