The UK competitions regulator is set to drop a contentious claim that the Big Six energy providers overcharged customers by £1.7 billion a year in a report due to be released on Friday.
The report marks the end of a two year investigation by the CMA into competitiveness in the energy market with a large focus on the market dominance of the Big Six, British Gas, npower, EDF Energy, E.ON, Scottish Power and SSE.
An interim report release in July last year made the claim that the Big Six had overcharged customers systematically. It said that the initial findings of the investigation “suggest that average prices offered by the Big Six firms over the period 2009 to 2013 were around 5% above the competitive level in the domestic segment”.
This, they said “amounts to domestic customers paying around £1.2 billion” more than they should have been paying on an annual basis. Further, the report claimed, small business were overcharged by an average of £500 million a year, bringing the total annual overspend to £1.7 billion.
This figure was quickly disputed by all of the Big Six, who described it as misleading and. According to a source who spoke to the Financial Times, “the Big Six were ready to challenge this one in the law courts.”
The Financial Times has been told, ahead of the issuing of the final report, that the CMA will be removing any reference to the £1.7 billion overcharging from the report, and instead will focus on gains that could have (and still could) be made by switching provider.
Proposed remedies that have already been scrapped included introducing a temporary price cap for standard variable tariffs that are being used by around 70% of energy customers.
The CMA also considered forcing the Big Six to break up their business, but this has also been scrapped.
According to the Financial Times’ source, the overcharging figures were what “caused the most anger among energy companies – they were furious. The CMA seems to have listened to this so is clarifying the language it uses.”