Regulator slams ‘unfair’ energy chargesConsumers set to benefit from Ofgem investigation

07 October 2008

A blue flame from a gas hob

Although there is no 'green gas', you can still switch your energy supplier to a green tariff

Energy regulator Ofgem has warned gas and electricity suppliers to stop charging customers different rates for paying by direct debit or pre-payment meters.

According to a new Ofgem report, the average difference in the price paid by customers with pre-payment meters and those on direct debit tariffs is £118 a year. Customers who pay their bills quarterly by cash or cheque were found to be paying £80 more than direct debit customers over a year.

Announcing the findings of a seven-month investigation into the gas and electricity markets, the regulator said that while it was satisfied the market worked well for most consumers, suppliers must ensure that competition works for all households.

Losing out

Consumers not connected to the mains gas grid are among those losing out. Ofgem says that its proposals – which are now out for consultation – will help over four million customers without access to the most competitive offers.

Ofgem has also asked for more transparency in suppliers’ financial reporting to help better understand the link between the price at which suppliers buy energy and the price they charge their customers.

And it wants to address the concerns of smaller suppliers who say they're unable to break into the market, which is currently dominated by just six companies – British Gas, Npower, ScottishPower, Scottish & Southern Energy, Eon and EDF Energy.

Burden on consumers

The regulator added that while the price of global commodities such as oil, gas and coal, was the main reason for high energy bills, the indexation of gas prices to oil prices in uncompetitive European markets was placing an ‘unjustifiable burden on consumers’.

Ofgem chairman Lord Mogg said: ‘Stronger competition in European energy markets would help to break the oil and gas link. It is vital that the negotiations on measures to open up the European energy markets are successfully concluded this year by the European Parliament by the end of this year.’

Customer satisfaction

Helen McCallum, director of policy and communication at Which?, welcomed the Ofgem report: ‘We're pleased that Ofgem is recognising the plight of energy customers and also support the proposed actions to help with transparency and barriers to entry in the market.

‘However, time is of the essence: energy prices have shot up and customer satisfaction is the lowest of all industries. Only 12% of our members think their supplier has done all it can to avoid a price rise, so we expect Ofgem to deliver these changes in a clear timeframe and make sure all customers see a real impact on their experience soon.’

A recent survey by Which? found that customer satisfaction with energy suppliers was the lowest of all industries covered by its satisfaction surveys.

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