Energy firms shamed over £330 rip-off

Difference between typical bills and cheapest offers has almost DOUBLED

THE ‘Big Six’ energy firms have been shamed for almost doubling the price gap between standard tariffs and the cheapest deals.

The difference between the average standard variable-rate tariff and the best deal on the market has soared by £147 to £329 since 2014.

The average cost of a standard deal with British Gas, SSE, Npower, EDF, E.on and Scottish Power is £1,063 a year. This compares with £734 on the Flex1 tariff with a small firm called Iresa.

As it released the figures, the consumer group Which? warned that customers have lost trust in energy suppliers.

More than 60 per cent of households are on the more expensive standard tariffs, boosting energy companies’ profits as customers struggle.

The firms have come under fire for failing to pass on falls of more than 30 per cent in the wholesale cost of gas and electricity to those on standard tariffs.

The rise in the price gap comes as the industry is investigated by the Competition and Markets Authority over allegations of market rigging and profiteering.

The CMA says failures in the market mean people on standard tariffs are colcheapest lectively paying £1.7billion a year too much for heat and light.

The watchdog is considering remedies to give customers a better deal. At one point, these included a temporary blanket cap on standard tariffs, but this was dropped after lobbying from the industry and opposition from David Cameron.

Instead, the CMA is investigating a more limited cap that would apply only to households with prepayment meters.

It is also suggesting the names of those who have been on a standard variable tariff for three years should be made available to all energy companies, allowing them to offer cheaper deals directly.

But critics say this will simply trigger a blizzard of junk mail.

The fact that energy firms continue to impose high charges on customers on standard tariffs suggests they are confident the CMA investigation will not come up with any radical proposals.

Government ministers and the energy industry insist there is strong competition and that families can easily shop around for the

‘Paying over the odds’

deal. But Which? said there has only been a tiny increase in customers switching suppliers over the past two years.

The consumer group’s Alex Neill said it was concerned the CMA’s remedies will not lead to a better deal for customers who have never switched and are overpaying by hundreds of pounds.

She added: ‘It is right that the energy market has been investigated but during this time the gap between standard tariffs and the cheapest deals has continued to soar. ‘If consumer trust is to be restored in this market, the CMA proposals must bring about real change to benefit consumers who have been paying over the odds.

‘The regulator must set out how it will measure the success of its reforms and ensure they will be effectively reviewed, so that action can be taken if competition and consumer outcomes don’t improve.’

Energy firms did bring down the cost of gas earlier this year, but the reductions were tiny in the context of the fall in wholesale prices. Profits at the biggest energy firm, British Gas, rose by 31 per cent to £574million last year.

The figure for the second-biggest supplier SSE’s retail arm was £455.2million – virtually identical to the year before despite the fact that the company lost 370,000 customers. The industry trade body Energy UK said firms are introducing new cheap tariffs.

Chief executive Lawrence Slade said: ‘Dual standard variable tariffs have fallen by 7 per cent and dual fixed tariffs by 14 per cent over the last two years. There are now 53 deals under £900 being offered by 40 suppliers.

‘People should take advantage of the fantastic deals out there. Suppliers have made it even easier for customers to switch.’