Page last updated at 20:17 GMT, Thursday, 16 February 2006

Q&A: Are cheaper bills on the way?

Europe's gas and electricity companies face a crackdown on anti-competitive behaviour, the European Union has warned.

With consumers already facing substantial energy price increases, BBC News looks at whether the latest probe will lead to cheaper bills.


Why the EU probe?

Gas and electricity companies have imposed hefty price rises on consumers and industry and the EU has been concerned that customers do not receive genuinely competitive offers from the many gas and electricity suppliers in the market.

The probe, which started last summer, looked at whether energy firms on the continent had colluded to keep prices high.

On Thursday it published its initial findings.

What has it found?

Energy giants on the continent, particularly in France and Germany, are blocking competition and helping force up wholesale and retail prices, the EU claims.

EU Competition Commissioner Neelie Kroes said she would now pursue investigations under EU anti-trust rules into "specific cases" of closing off gas and electricity markets to fair competition.

Meanwhile, she said businesses must look at their own practices and make any necessary changes.

The EU believes an inquiry is necessary given the importance of the energy sector to the European economy.

Why did prices go up in the first place?

As Britain imports much of its supplies from the continent, wholesale prices have been forced up, which energy companies have passed on to customers.

Additionally, transporting gas through the European pipeline network is tricky because it is owned and run by a variety of national monopolies on the continent.

Notably the failure of the Belgium-UK Interconnector pipeline to import at its full rate caused gas prices to rise this winter.

Does the EU probe mean prices will fall?

Hopefully, yes.

The EU has promised a crackdown on European energy companies on the grounds that some companies may have held back supplies.

The UK has seen the average wholesale gas price rise by over 65% in 2005 compared with 2004.

Given that UK customers paid 1bn more than they should have for gas this winter, the crackdown will be welcomed by domestic and business customers and should result in cheaper bills in the long run.

Gas bills have risen by more than 40% in the last two years.

Commission action against energy market abuse would send a clear signal to European energy companies that anti-competitive behaviour would not be tolerated, said energy regulator Ofgem.

Will switching supplier work in the meantime?

The government officially encourages homeowners to switch to cheaper suppliers.

There are plenty of organisations willing to help consumers and millions of households have already switched suppliers.

But aren't all energy firms in the same boat?

Yes. So even if you switch to a cheaper supplier, there's no guarantee that they will not eventually raise their prices as they have to buy gas and electricity in exactly the same international market.

So is switching a waste of time?

Not exactly. The argument goes that savings can still be made, especially if you have never switched before as you may be on your energy company's highest tariff.

So you may still be able to achieve a significant cut in your bills.

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