Loyal energy users 'pay £90 more'

Updated: 

File photo dated 18/01/12 of a gas hob as more than half of UK adults say they will have to cut their spending to cope with rising household bills over the next year, Citizens Advice has warned. PRESS ASSOCIATION Photo. Issue date: Monday January 27, 2014. Three in five people (58%) are worried about the effect that higher bills will have on their finances and 53% - or 27 million - will have to cut spending to cope, according to a study by the consumer body. It is launching the Big Energy Saving Week today, backed by Government, charities and the energy industry, to help consumers take practical steps to make cuts to their bills. A survey found that of those who plan on cutting their spending, 59% say they will have to reduce the amount they spend on food, 37% will look for ways to reduce their energy bills, 8% will consider moving to a cheaper home and 66% say they will have less to spend on time out with family and friends. See PA story CONSUMER Bills. Photo credit should read: Yui Mok/PA Wire

Energy companies are charging their most loyal customers up to £90 more than those who have switched to them, according to new figures.

The biggest companies add a surcharge to the tariffs of customers that they inherited from their time as monopoly suppliers, meaning that these households pay more for their energy than they need to, the think-tank IPPR claimed.

The figures appear to back claims of "predatory pricing" whereby companies lure new customers with low prices funded by profits made from long-standing accounts.

The IPPR's analysis found electricity bills in 2013 for customers who had not switched supplier since the market was opened to competition were on average £27 higher than for customers who had switched.

The disparity in prices was greatest for those who pay their bills by standard credit, with a difference of £29 between those who had and had not switched.

Gas bills in 2013 for those who had not switched supplier since the market was opened to competition were on average £76 higher than for customers who had switched.

The disparity in prices was greatest for those who pay their bills by direct debit, with a difference of £89 between those who had and had not switched.

The IPPR said the different amounts paid for gas by those who had and had not switched had trebled since 2010, rising on average from £26 to £76.

IPPR senior research fellow Reg Platt said: "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.

"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.

"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. In the four years since Ofgem launched a major review into whether competition is effective in energy, the surcharge on gas prices has increased substantially.

"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."

10 consumer rights you should know

10 consumer rights you should know