Families are facing higher electricity and gas bills after the collapsed energy firm First Utility bought a big six supplier.
First Utility, which was highly successful in the past but is closing down, bought utility supplier Energy UK. Under the deal it will take on more than 800 staff from seven companies including E.ON, SSE and Scottish Power.
After the First Utility deal was announced, energy regulator Ofgem announced the Competition and Markets Authority would investigate energy supply prices.
As the company collapsed, the energy secretary, Amber Rudd, urged customers to switch suppliers.
In a statement, First Utility said it would take a £5m write-off in the third quarter of its 2015 financial year, taking the total loss for the nine months to 30 June to £15m. The company said it had remained in a robust financial position in the wake of the collapse of Carillion, which owns contracts worth £1.7bn to some of its customers.
First Utility, which was part of the industry’s Big Six before it left the market last November, was caught in a vicious price war when the rest of the sector responded to the tiered tariffs of smaller suppliers. It had a dominant market share of 11.4%.
Ofgem said the new CMA investigation would look at “combating fraud, supply mis-selling and possibly the pricing of tariffs, including remedies to a market where no price controls apply. “In November 2015, the CMA published a report on the fairness of the market, looking at affordability, and its findings led to the reformed default tariff and the possibility of price caps.”
Families have been warned to brace themselves for “higher prices” and said more households could switch supplier. However, consumer groups pointed out that the industry already operated with price controls at least until 2020, and some consumers were unlikely to want to exit the standard tariff unless they could find a cheaper deal.
Dominic Baliszewski, consumer affairs expert at moneycomms.co.uk, said: “People on standard variable tariffs will have seen their bills plummet with the introduction of the price cap; it’s possible that their bills could rise again by switching supplier, especially if they’re on the main Big Six.
“If you’re on one of the Big Six, you’re probably getting a good deal. Look at the cheapest tariffs if you’re looking to move, don’t sign up to dodgy pre-payment meters, and switch if there’s a fixed rate deal you can switch onto that has come off.
“Consumers should not lose hope though, the CMA will have been tasked with writing a ground-breaking report on the state of the energy market. It may well recommend industry-wide price controls or new rules governing the retail energy market.
“One way in which regulators can make a real difference is by regulating the total number of tariffs on offer, so families won’t be able to find themselves with an energy supplier that offers just one tariff.”