Ofgem moves to cut fuel bills for 4m consumers

Ofgem moves to cut fuel bills for 4m consumers

The energy industry regulator, Ofgem, said yesterday that its seven-month investigation into Britain's energy market had found no evidence of price-fixing by the big six suppliers, but it warned that millions of consumers were missing out on the benefits of competition.

The regulator said 4 million consumers were unable to take advantage of the best offers, leaving them an average of £55 a year worse off. Customers who used pre-payment meters often paid a premium that could not be justified by the actual costs of the service. Those paying quarterly by cash or cheque were charged an average of £80 more than those who used direct debit - double the level of 2005.

In its report, Ofgem expressed concern that many of the most vulnerable customers, including the elderly and those on low incomes, were less likely to be able to make informed choices about tariffs. The regulator said it was proposing wide-ranging reforms, which would be subject to a fast-track consultation process, including a requirement for companies to provide information to help consumers get the best deal.

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Ofgem will also look at the wholesale electricity market to make it easier for new entrants to challenge the incumbents: British Gas, Scottish and Southern Energy, EDF Energy, Scottish Power, E.ON and npower.

Alistair Buchanan, Ofgem's chief executive, said: "These are hard times and we are taking a hard line on behalf of disadvantaged customers. We accept global influences are pushing up costs but the suppliers must change their behaviour. If they fail to satisfy our requirements voluntarily then we can move to a Competition Commission reference." However, he added: "We have found no evidence of a cartel."

Ofgem set up the inquiry in February in the wake of a round of price increases from the big six suppliers. Prices have since gone up again, with the companies blaming soaring prices in the wholesale gas and electricity markets.

Yesterday's report was given a mixed reception. The chief executive of the National Housing Federation, David Orr, said: "The announcement ... by Ofgem that it is going to consult over the introduction of a voluntary scheme to end the pre-payment meter rip-off is deeply disappointing, as it means that the plight of some of the poorest in society will drag on.

"This was Ofgem's big chance to show it was a regulator with teeth but it has fluffed it. Asking fat-cat energy companies to do the right thing by the fuel poor is like asking Dracula to look after a blood bank."

guardian.co.uk © Guardian Newspapers Limited 2008