Five million people are being overcharged for their energy, claims a leading thinktank in a report released over the weekend.
The Institute for Public Policy Research claims some families are paying as much as £330 more than their neighbours for the same amount of electricity or gas.
The analysis showed people on a ‘standard credit account’ who pay for energy in arrears are very unlikely to switch tariff or supplier. These customers are most at risk of being overcharged, says the IPPR.
It claims more than 60% of households have never switched supplier while 34% of these are on standard credit accounts.
IPPR says the findings support claims many consumers are being overcharged to subsidise heavily discounted, “loss-leading” offers for the small minority of customers who regularly switch suppliers.
Nick Pearce, IPPR Director said: “At a time when living standards are falling in real terms and more families are finding it hard to pay their energy bills, it is unacceptable that people are being overcharged for their energy use.
“The loss-leading by some suppliers is limiting competition in the energy market by making it harder for small suppliers and new entrants to compete.”
IPPR is calling on industry watchdog Ofgem to stop suppliers offering these tariffs. Ofgem welcomed the report’s “contribution to the debate” on market reform.
A spokesperson said: “We believe these reforms and the banning of unilateral price increases for non-standard tariffs will reduce the scope for suppliers to pursue pricing and marketing strategies that are harmful to consumers. This offers the fastest way to address the issues raised by the IPPR report.”
IPPR looked at tariffs for British Gas, EDF, E.ON, npower, ScottishPower and SSE for three different payment types using a price comparison website for properties in London, Sheffield, Dumfries in Scotland and Aberystwyth in Wales.