EDF and Scottish Power in charging probeOfgem points to 'unjustified price premium'

05 July 2010

Energy suppliers under pressure from Ofgem 

Energy giants EDF and Scottish Power must explain themselves to the energy industry watchdog after it found evidence suggesting some customers were being charged an 'unjustified price premium'. 

The evidence was uncovered while Ofgem was monitoring the effectiveness of recent reforms within the industry. It has demanded that the companies provide an explanation 'quickly'.

Ofgem's demand is the first stage of a process which could lead to a formal investigation if it feels the responses aren't satisfactory.

Energy postcode lottery

An Ofgem spokesman told Which? that a 'line of inquiry' with one company concerned it charging more within an area where it was previously the monopoly supplier. The effect of this is a pricing 'postcode lottery' for customers. The other company has been challenged over aspects of its quarterly tariff. Which? understands that the former company is EDF and the latter is Scottish Power.

The regulator allows companies to charge more for certain tariffs if they incur extra costs - but says that it has found some premiums that couldn't be justified on cost differences. 

Price differences

The recent reforms, which include tackling price differences and giving clearer information on bills, were introduced to help protect consumers following a major review into Britain's retail energy market last year. 

Ofgem's Sarah Harrison said: 'We do have concerns over some premiums and have made it clear to the two suppliers concerned that we will take action if the differentials cannot be justified.'

Ofgem also warned all suppliers to be transparent when marketing online deals particularly when temporary details are offered. 

Suppliers respond

EDF sent us a statement. The French-owned supplier said: 'Like other suppliers, EDF Energy has regular dialogue with Ofgem to discuss a range of subjects, including pricing.

'EDF Energy charges the same price for its gas in all areas across the country. The company took steps in its Spring 2009 price change to improve the cost reflectivity of its regional electricity prices, several months before the new licence conditions were introduced,' it added.

A spokesperson for Scottish Power said: 'Ofgem has asked Scottish Power to justify our prompt payment discount for quarterly customers which is significantly larger than our competitors. We are currently discussing this with them.'

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