Big Energy Firms Face Pricing Clampdown - skynews March 21, 2011

Big Energy Firms Face Pricing Clampdown Article from: - skynews March 21, 2011

Gas and electricity suppliers have been accused of failing consumers by the regulator Ofgem which has proposed to sweep away "complex and unfair pricing practices".

After a review of the domestic energy market, Ofgem decided that complicated price tariffs and bad behaviour by suppliers have been stifling competition.

Ofgem chief executive Alistair Buchanan said: "Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market.

"Consumers have told us that energy suppliers' prices are too complicated.

"It is no surprise that they are bamboozled when tariff complexity has increased from 180 to more than 300 since 2008.

"That is why we are planning to sweep away this complexity so suppliers' prices are fully exposed to allow easy price comparisons."

Ofgem is proposing to break the stranglehold the Big Six have over the electricity market.

Chief Executive Alistair Buchanan

The Big Six are British Gas, e.on Energy, EDF Energy, Scottish Power, npower and Scottish & Southern Energy.

Ofgem said that, for the first time, it had evidence that the suppliers had pushed up prices in response to rising costs more quickly than they reduced them when costs fell.

It launched its review in November after it emerged that price increases had seen suppliers' profit margins soar by 38%.

The regulator has given them eight weeks to reform the way they operate or it will refer them to the Competition Commission.

To avoid referral, it has asked suppliers to comply with a series of proposed reforms beginning with less confusing tariffs to allow customers to compare prices more easily.

Major companies would also have to auction up to 20% of the energy they generate to other suppliers to stimulate competition in the market.

Scottish and Southern Energy (SSE) said the proposals represented "potentially radical changes" to the British energy market.

"While SSE believes the market is fundamentally sound, it will participate constructively in this next phase of review and consultation, the firm said.

Meanwhile, rival British Gas said it welcomed the move to "improve electricity market liquidity and transparency in the reporting of company returns".

Energy Secretary Chris Huhne added: "Consumers deserve the best possible deal, which means rough and tough competition in the marketplace."

The lobby group Consumer Focus claimed the structure of the energy market currently made it "nigh on impossible" for new companies to enter.

Chief Executive Mike O'Connor told Sky News: "Consumers have less confidence in energy companies than in any other sector - they feel that prices aren't fair, that tariffs are too complex and that the market doesn't treat them well."

"(Energy) companies are now on a very short leash. If they cannot show the will and capacity to change we would expect Ofgem to refer aspects of the markets to the Competition Commission."

Ofgem has also announced an investigation into whether Scottish Power charges unfair prices to customers who are not signed up to pay their bills by direct debit.

A Scottish Power spokesperson said: "We believe that our pricing is cost reflective and in accordance with Ofgem's Guidelines, but we will of course co-operate fully with Ofgem in the investigation and in reviewing their concerns."

Other investigations into the handling of complaints and mis-selling by other energy companies are continuing.

Video and Article http://news.sky.com/skynews/Article/201103115956854

Sobeys expected to follow competitors, hike prices - Article by ROGER TAYLOR in The Chronical Herald

Sobeys expected to follow competitors, hike 
prices (found at www.thechronicalherald.ca)

By ROGER TAYLOR Business Columnist

Tue, Mar 8 - 7:24 AM

We should find out today whether Sobeys Inc. will follow the lead of its competitors and raise food prices in response to inflation. All the signs suggest it will.

In the days leading up to its third-quarter results, out today, the Stellarton-based grocery chain, a wholly owned subsidiary of Empire Co. Ltd., was in a quiet period and could not respond publicly to the suggestion by competitor Loblaws that it’s expected to raise food prices.

In Empire’s second-quarter report, released in December, Sobeys did indicate it was willing to eat rising costs because it couldn’t afford to give up on competitive pricing at that time.

Sobeys president and CEO Bill McEwan told analysts during a conference call: "We have begun to see some commodity price increases but clearly we anticipate considerably more."

He said grocery prices at Sobeys had declined by about one per cent during the second quarter, which ended Oct. 30, 2010.

But since that time, dramatically rising fuel costs have been adding to the demand to raise food prices. That is why it is expected that Sobeys, Canada’s second-largest grocery chain, will re-evaluate the low- price strategy while remaining price competitive in an increasingly tough business.

Sobeys, market leader Loblaws and third place Metro, which together account for about 60 per cent of the Canadian grocery market, have complained in previous quarters that falling retail prices due to stiff competition were taking a toll on profits.

That is why food executives are hopeful consumers will be willing to accept at least some of the price inflation; otherwise, the companies will be forced to continue absorbing the increased costs, which will affect the bottom line.

When contacted for a comment on whether Sobeys believes it will be able to pass along price inflation to the consumer this time around, a company spokesman indicated management could not comment before today’s conference call.

However, I was referred to comments McEwan made at a CIBC World Markets conference in Toronto a couple of weeks ago:

"We remain committed to being price competitive in each market we serve. . . . We are seeing signs of balanced inflation starting, in which retail prices rise in step with manufacturer prices and the general cost of doing business. There appears to be an appetite for that to happen but we shall see. If we behave like a mature industry, it will happen.

"If we continue to pursue business that is not there, we will see continued deflation."

In the parent company’s second quarter, Sobeys reported strong profits despite heavy competition.

The grocery business in Canada is increasingly fragmented. It isn’t only the grocery stores selling food these days. Competition is coming from retail giant Walmart, drug chain Shoppers Drug Mart and even Canadian Tire has been experimenting with selling groceries.

In December, McEwan said he was optimistic the market would soon be in a position to hike prices in line with food inflation.

He also pointed out that some parts of the country have a more competitive retail marketplace than others, so price increases wouldn’t necessarily be felt equally across the country.

In the Toronto marketplace, for example, all companies are engaged in a cutthroat battle to gain market share that means the grocery chains will be watching each other very closely.

While no one wants higher food prices, it is important that Canada maintain a competitive retail food sector. In the end, competition is the best way to safeguard against unfair price rises.

It should be interesting to hear what Empire and Sobeys officials have to say today.