The “broken” energy market in Britain must be fixed by introducing a price cap before next winter.
The Business, Energy and Industrial Strategy (BEIS) Committee is urging the government to implement the cap as soon as possible to protect loyal customers from being ripped off by suppliers.
MPs said the Big Six energy companies have themselves to blame for the price cap for raising prices last year and “failing to take effective action against the overcharging for years” for customers on default and standard variable tariffs (SVTs).
Their report found competition in the domestic energy market is not working effectively for 12 million customers stuck on those poor value tariffs – SVTs are said to be the most expensive on the market.
They believe the market has become “two-tiered”, with some consumers paying up to £300 more than others every year.
The Committee added energy suppliers too often target new customers with cheap deals to encourage them to switch while making big profits from “sticky” customers on expensive variable tariffs who do not or rarely switch.
Chair Rachel Reeves MP said: “The energy market is broken. Energy is an essential good and yet millions of customers are ripped off for staying loyal to their energy provider. An energy price cap is now necessary and the government must act urgently to ensure it is in place to protect customers next winter.
“The Big Six energy companies might whine and wail about the introduction of a price cap but they’ve been overcharging their customers on default and SVTs for years and their recent feeble efforts to move consumers off these tariffs has only served to highlight the need for this intervention.”
The Committee also found the energy market has been “dysfunctional for years” and said Ofgem is “too slow and reluctant” to use its powers to step in and protect the interest of customers, especially vulnerable households.
It is urging Ofgem to be faster and more proactive in using its extensive powers to protect customers from being overcharged in the future.
Business and Energy Secretary Greg Clark said: “Today’s in-depth independent report from MPs backs up exactly what we have been saying – that the energy market isn’t working for customers stuck on rip-off tariffs and that government intervention is justified. That’s why we’re are taking action by bringing in laws to cap prices so that consumers are protected from high energy bills.”
Ofgem said it is “determined” to deliver a better deal for all consumers, adding: “This is why we are pressing ahead as quickly as possible with plans to further extend price protection from five million consumers to all those on poor value default deals as soon as the Tariff Cap Bill is passed by Parliament.
“Our aim is to protect those who do not switch, while making it easier for those who do to get a better deal.”
Trade body Energy UK said suppliers will remain committed to improving engagement and choice for customers and those in vulnerable circumstances.
CEO Lawrence Slade added: “With a record one in six customers switching last year and over 60 suppliers to choose from, the energy market is changing rapidly and has never offered so much choice. It’s vital the cap doesn’t halt the growth of competition which is helping customers to find a better deal and save on their energy bills.
“It’s also important that the cap accurately reflects suppliers’ costs, most of which are out of their direct control.”