Regardless of whether you are on a prepayment meter, you live in rural areas or you pay by standing order; Ofgem, the Energy Regulator, is demanding that customers are treated as equals and should not be penalised by their circumstances and that their energy bills should reflect that of the suppliers costs.
Having already addressed the issue of pricing strategy with the energy suppliers, Ofgem now plans to take action.
In the new year, Ofgem want to address the terms of the energy providers licences and are warning suppliers that they may be referred to the Competition Commission for investigation if they do not agree.
With recent media coverage surrounding energy pricing, it is now common knowledge that customers on prepayment meters and those living in rural areas suffer with higher energy premiums than others. Prepayment tariffs offered by the suppliers are often more expensive and customers who live in rural locations are mostly unable to benefit from the so called “dual-fuel” discounts.
However, their is a ray of hope for prepayment customers as Ofgem reports that energy suppliers have cut costs by a total of £300m out of its target of £500m. The remaining £200m of price cuts relates to customers without access to mains gas.
The telegraph.co.uk have reported that Ofgem wants to go further with its new proposals, ensuring that energy firms cannot impose price differentials in the future unless they are justified by the costs involved. It has estimated the extra cost of marketing to customers in different areas at just £3 per customer per year, although there are also regional variations in the cost of physically supplying the energy.
“The suppliers have already cut a total of £181m from regional price premiums, but we think this may not be enough,” said a spokesman. Mark Todd of energyhelpline.com, the energy switching service, estimated the price premium for customers loyal to their regional supplier at 5pc or about £25 per year for the typical electricity bill.
Ed Mayo, the chief executive of Consumer Focus, the statutory consumer watchdog, said: “This is excellent news for some of the most hard pressed energy consumers. It is good to see signs of life in Ofgem when there are so many question marks around overcharging and only lukewarm competition in the market.”
But he added: “British consumers have been overcharged by millions of pounds over recent years. And this action does nothing to advance price cuts for mainstream consumers, which must now be the priority for Ofgem.
“Ofgem should keep open its scrutiny of the premiums that companies are holding on to in relation to prepayment meter, standard credit and off-mains gas customers. We would welcome a fundamental assessment of the costs to ensure that they are justified.”
Mr Todd said: “Today Ofgem the pussycat has roared like a lion. But it needs to do more to ensure the £5.5bn price cuts that will soon be due to the British public from the recent collapse in wholesale prices are also passed on.”
He estimated the extra cost to customers off the gas main at £33 a year on the typical electricity-only bill of £450.
