Fewer, bigger energy suppliers would improve competition in the market and bring bills down – almost the total opposite of current plans to shake up the energy market.
That’s according to a consultant from Ernst&Young who points to figures regulator Ofgem has calculated showing suppliers’ fixed costs for operating can be around £500million.
By shaving down the number of large suppliers – the UK’s market is currently dominated by the ‘Big Six’ – this would leave them with more cash to keep bills down, argues the analyst.
Richard Postance, partner at Ernst & Young told the Daily Telegraph: “Having fewer, but better, healthier competitors could be good for consumers.”
The comments take a different tack on the question of how to boost competition. Current plans by Ofgem to crack open the market will demand the largest suppliers publish the prices of their energy trades as well as making it easier for smaller providers to operate.
However Mr Postance explained: “Each company has systems costs, finance departments, tax departments, management teams. Having fewer companies would spread the cost out among more consumers.”
He added: “We as a country seem to have jumped to the conclusion that competition means number of companies rather than the diversity of what is being offered.”