Millions of consumers 'ripped off by energy companies' as watchdog orders end to overcharging

Power giants are ripping off more than nine million households, according to the energy watchdog.

Some 5.9million customers with prepayment meters are being charged on average £118 a year more to stay warm than those who pay by direct debit.

But the 'big six' power companies could be raking in as much as £113million extra a month, much of it from poorer families and pensioners who are not signed up to the cheapest online deals, the National Housing Federation warned.

The scandal was uncovered by the industry regulator Ofgem yesterday, following an eight-month probe into spiralling charges imposed earlier this year.

It also found that some four million people who are not linked to the gas mains have been overcharged by £55 a year for their electricity.

Despite its findings, Ofgem failed to order an immediate halt in pre-pay meter charges, a decision-that drew condemnation from campaigners.

The regulator has given power suppliers until Christmas to make voluntary changes or face further investigation by the Competition Commission, which could take months.

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The National Housing Federation, which represents local housing associations, described Ofgem's response as 'deeply disappointing'.

Its chief executive David Orr complained: 'This was Ofgem's big chance to show that 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.'

Tory business spokesman Alan Duncan said: 'These are completely unacceptable commercial practices which the Government should have cracked down on months ago.'

Ofgem began investigating British Gas, Eon, Npower, Scottish & Southern Energy, EDF and Scottish Power in February after all six imposed hikes of up to 25 per cent in bills.

It has cleared the firms of operating a cartel, rigging prices or imposing unjustified increases.

However, it found evidence of serious failures to offer millions of customers a fair deal.

Ofgem found the price difference between paying by PPM and direct debit has surged from around £80 to £118 since 2005. The difference between paying quarterly and by direct debit has doubled to £80.

It is also concerned that millions who choose to pay by cash or cheque on a quarterly basis are also being charged more than those on direct debit.

Its chief executive, Alistair Buchanan, said: 'Initial findings from our energy market probe give us grounds to demand that companies end practices that hinder customers, especially the vulnerable, from getting the best deal. continues here

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