Some UK households are being charged hundreds of pounds more than they should each year due to a lack of regulation and competition in the energy market, new alarming research has found.
The study by the Institute for Public Policy Research (IPPR) revealed that some families are paying as much as £330 more than their neighbours to use the same amount of gas and electricity from the same company, and warned that the gap between the ‘true cost’ of energy and what all UK consumers pay could total a staggering £1.9 billion by 2020.
According to the think tank, the disparity is the result of the ongoing dominance of the UK market by the ‘Big Six’ energy firms, and it has called on the UK energy watchdog Ofgem to ensure pricing is more fair.
Currently, more than five million Britons could be overpaying because energy tariffs are not cost reflective as required by Ofgem. It added that so-called loss-leading tariffs from the ‘Big Six’ also prevent competition as smaller suppliers cannot compete.
The think tank estimates that with annual efficiency savings of 2.5 per cent and profit margins at 4 per cent, the UK’s major energy suppliers could cut £70 off the average household annual bill.
IPPR associate director, Will Straw, said: “We are calling on the Big Six and Ofgem to demonstrate whether efficiency savings are being achieved in the energy market and whether consumers are benefiting from lower bills as a result, as we would expect if competition was working.”
“We need more competition among energy companies so that households get a fairer price for their energy but Ofgem’s previous attempts to reform the market have not delivered the changes needed.”
