Four million could see bills slashed amid plans for energy market shake-up

Four million households on pre-payment meters could see energy bills cut under plans for a shake-up of Britain's gas and electricity market.

But customers could see a surge in mail arriving through their letter boxes as new proposals will force providers to open up their databases to allow rivals to offer those on default tariffs better deals.

The Competition and Markets Authority (CMA) claimed British households were overpaying by £1.7 billion on average a year and said the Big Six providers have been taking existing customers for granted.

In its long-awaited report, the CMA said it wants to set a temporary price cap for low income and vulnerable customers who have pre-payment meters, and plans to launch an Ofgem-controlled database allowing rival suppliers to offer new tariffs to those stuck on standard variable tariffs (SVTs) for three years or more.

The CMA said too many households - 70% of Big Six customers - were still on more expensive SVTs and could save more than £300 on average a year by switching.

Roger Witcomb, chairman of the CMA's energy market investigation, said: "We have found that the six largest suppliers have learned to take many of their existing domestic customers - some 70% of whom are on 'default' standard variable tariffs - for granted, not just over prices, but with their service and quality."

He said the CMA's report sets out a range of "bold, innovative" measures to improve competition in the energy market.

But the report drew criticism for letting energy providers off the hook, while the database sharing plans sparked concerns that the suppliers will inundate customers with marketing letters.

Shares in British Gas owner Centrica rose as it said the "majority" of proposals would benefit its customers in a sign that the CMA's proposals have given the industry a reprieve.

Shadow energy and climate change secretary Lisa Nandy said: "Right now it's clear to nobody why some families pay hundreds of pounds more than others for their energy and these proposals won't fix this.

"While a safeguard tariff for customers stuck on expensive pre-pay meters is welcome and will protect some households, we will need to go much further to make sure bills are fair and transparent for everybody else too."

Richard Lloyd, executive director at consumer group Which?, said there was still a "long way to go" in making the energy market fair and competitive.

Energy and Climate Change Secretary Amber Rudd insisted the CMA's proposals were a "wake-up call to the Big Six".

She added: "Energy customers should get a fair deal from a market that works for them. That's why we called for the biggest ever investigation into the energy market and won't hesitate to take forward its recommendations."

Smaller independent providers broadly welcomed the CMA's proposals, which follow a near two-year investigation into the UK energy market.

But Ian McCaig, chief executive of First Utility, cautioned over database sharing.

"It is vital that this is properly governed to avoid customers being bombarded with information from more than 30 suppliers, which could further damage trust," he said.

The latest proposals follow a report last July from the CMA which found "widespread consumer disengagement".

The CMA stopped short of the most radical proposals, last summer saying it would not recommend a break-up of the Big Six, while proposals mooted last year for a wide-ranging price cap on SVTs have been rowed back.

The CMA must deliver its final report by June 25.