The IPPR (Institute for Public Policy Research) says that tough action is needed to improve competition in the energy industry and ensure consumers are charged a fair price.
The fact that six big energy companies have a stranglehold on the energy market in the UK means consumers will spend almost £2bn too much on their domestic energy by 2020, according to the IPPR report.
The IPPR says that efficiency savings by energy companies could help to lower energy bills. The IPPR report, The True Cost of Energy, shows that annual efficiency savings could save consumers £1.9bn by 2020. In 2010, Ofgem found that the energy company which was least efficient spent more than double that of the most efficient company on its operations per customer.
The IPPR says these saving would help to make up for the cost of green energy, which is also blamed for increasing energy bills.
The director of policy and external affairs at Consumer Focus, Adam Scorer, said “There are many improvements which can be made to this market, but a good start would be to ensure that smaller suppliers can compete with the big six on a level playing field. Customers also need to know that suppliers are really competing for their business by passing on efficiencies and wholesale cuts, as well as ensuring customer service is first rate”.
There are also complaints that energy providers charge their current customers more, in order to pay for cheap offers to entice new customers.
The Big Six energy companies argue that their profit margins are very small and they are simply responding to rising wholesale gas costs. And energy prices are not just increasing in this country. In Australia consumers are facing an increase of 8.3% in gas prices from tomorrow. Furthermore, it’s not just domestic energy which has gone up, business gas prices and electricity prices have also increased over recent months as third party costs have increased for energy suppliers.
Ofgem has proposed a number of measures to improve the industry. It’s also called on energy companies to be more transparent and cut the number of tariffs they offer to try to reduce confusion amongst consumers.