Millions of energy customers have been paying too much for their energy bills, a year-long investigation by the Competition and Markets Authority (CMA) has found.
Between 2009 and 2013, British Gas, E-On, Npower, EDF Energy, Scottish Power and SSE collectively charged households £1.2bn a year more than they would have in a competitive market.
The
CMA found dual fuel customers could save £160 a year on average by switching supplier. The average household spent about £1,200 on energy each year. For the poorest 10% of households, energy bills now account for about 10% of total expenditure.
Those on low incomes, with low qualifications, who live in rented accommodation or are aged over 65 are most likely to remain on the more expensive variable rate, having failed to switch. The big suppliers, aware of these inactive customers, were able ‘to exploit such a position through their pricing policies’, the CMA said.
CMA says that a transitional price cap should be considered.
Energy UK, which represents the major suppliers, said “There is greater choice for customers. It is easy to switch and a few minutes online could save households money and get them the deal that is right for them."
The CMA will also be considering whether safeguards such as a transitional price cap on the most expensive tariffs are needed to protect customers until other measures have led to a more competitive market.
Price cap
People who do not switch suppliers or tariffs at the end of their current contract would automatically move to a default tariff. The maximum price of this so-called 'safeguard' tariff would be set by regulator
Ofgem - which at present has no power over prices - or the CMA.
Gas and electricity prices have risen by 125% and 75% respectively in the past 10 years, but much of the increase in recent years has been down to environmental and network costs, according to the CMA.
To help vulnerable customers, the CMA has proposed that those on pre-payment meters, who are often charged the highest tariffs, should be the first to receive smart meters when the national rollout gets underway.
Citizens Advice recently found customers on pre-payment meters have been paying an average of £226 a year more than they would have done on the cheapest direct debit tariff and that the gap was growing. Ofgem found that these customers were also being charged to have meters installed or removed.
"This is a damning indictment of how the energy market is failing consumers, with the biggest suppliers taking advantage of millions of households who have also been hit with the costs of government energy policy," said Richard Lloyd, the executive director of consumer group
Which?
