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.

British firms will have to pay 400 per cent more then French rivals for power

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

Energy giants 'prey' on poor forced to use pre-pay meters

Energy companies are charging people on pre-payments up to £567 a year more than wealthier customers on internet tariffs, a government-funded consumer group has found.


In the last report before its abolition, Energywatch accused the energy firms of "preying" on poor customers who could not move to cheaper tariffs because of debt problems.

Poorer customers buy credits for their electricity and gas supply to load into the meters rather than pay monthly or quarterly. But the big six energy companies charge them far more than other customers. In January, The Independent disclosed that customers with pre-payment meters are charged 10 times more than the energy companies pay back to vulnerable customers on little-publicised "social tariff" schemes.

One million of the five million pre-payment customers are classed as being in fuel poverty by Ofgem, the electricity regulator.

In an investigation, the consumer group Energywatch found that British Gas – biggest of the big six energy companies and the one which spends the most on its social tariff – charged pre-payment customers the most of all its rivals, £567 more than its cheapest deal.

The disparity was next greatest at the German-owned firm E.on, which charged pre-payment clients £411 more than those on its cheapest deal, followed by Npower £378, ScottishPower £172, and Scottish and Southern £167. EDF has no equivalent tariff.

Allan Asher, Energywatch's chief executive, said: "Energy suppliers are preying on their poorest customers with discriminatory tariffs that squeeze extra revenue out pre-payment meter-users, which includes many of those least able to afford to pay their energy bills and least able to switch."

The Energy Retail Association said pre-payment meters offered customers flexibility and the ability to budget, and most were in rented homes, holiday lets and student accommodation. "According to Ofgem figures, just 20 per cent are used by the fuel poor," the trade body said in a statement. "Therefore equalising all tariffs would mean that those in fuel poverty who do not pay this way would subsidise the small percentage who are." continues here