Energy customers who don’t switch are getting charged more
Looks like energy firms are set for another bashing. New research by think tank IPPR shows that customers who haven’t switched energy suppliers are getting charged substantially more.
The analysis, which comes ahead of the regulators’ decision on competition in the energy market later this week, shows that electricity bills in 2013 for customers who have not switched supplier are £27 higher than those who have switched.
And it gets worse. Gas bills for customers who have not switched supplier are a whopping £76 higher than those who have switched.
Before the market was opened up to competition in the 1990s, energy firms operated as regulated monopolies in different parts of the country. There were fourteen regional electricity suppliers and one national gas supplier.
“Competition is failing in the energy markets. Our new analysis shows how the biggest energy companies add a surcharge to the tariffs of customers that they inherited from their time as monopoly suppliers,” said Reg Platt, senior research fellow at IPPR.
“This means that these customers pay more for their energy than they need to. It also means smaller suppliers are at an unfair disadvantage because they have not inherited any customers and must compete against the low prices that the big companies offer to people who have switched.”
IPPR’s critique isn’t saved just for the big six.
“Ofgem has shown itself to be incapable of taking the action that is necessary to get the energy market working in the interests of consumers,’ said IPPR’s Platt.
“The outcome of the new competition review due to be published this week cannot be simply more of the same. It’s time that the market was radically reformed so that small energy service companies, local authorities, communities and individuals can all become active players in the energy market.”
Labour has already pledged to scrap Ofgem and replace it with another regulator if it wins the next election. Ofgem is under intense pressure to be seen to be taking action and refer energy market competition to the Competition and Markets Authority this week.
Energy UK, which represents the interests of the big six, yesterday defended competition in the market.
“Competition in the energy market is increasing and the pace of change is on the up,” it said.
“Since the 1990s the number of suppliers has increased four-fold with smaller and medium sized companies now making up more of the market.”