The electricity rip-off

Millions of householders are being ripped off by up to £50 a year by greedy power companies.

The firms are passing on to customers only a fraction of a 40 per cent fall in wholesale electricity prices.

A National Audit Office report reveals that the ploy nets the suppliers an extra £600million a year.

Long-standing customers fare worst because they are often charged 20 per cent more than new clients.

This sharp practice can add £50 to the typical £250 annual bill.

Consumer groups and MPs lined up yesterday to condemn the electricity firms.

Ann Robinson, chairman of Energy-Watch, said: 'Britain's 24million electricity consumers are at the sharp end of a blatant price rip-off.

'I am furious that these price reductions have not been passed on. It is morally and ethically wrong.

'Companies are plainly exploiting their customers. We believe that action must be taken to get rid of price discrimination.'

Two thirds of Brtiain's households are losing out because they have stuck with existing regional suppliers.

Following privatisation in 1990, firms have been allowed to tout for business in other parts of the country. And the tariffs they offer elsewhere are often lower.

Scottish & Southern Group, for example, typically charges £283 in Scotland but only £217 in other areas.

It also charges £266 to long-standing customers in the south of England but
£217 on new accounts.

Npower's annual bill in the Midlands is £243 but new customers can pay £215.

And Powergen typically charges £236 in its East Midlands heartland but £222 elsewhere.

The NAO report follows a review of the way power is bought from generators.

It said that most consumers had seen falls of only 8 per cent despite wholesale prices tumbling 40 per cent. Tory MP

Edward Leigh, who chairs the Commons Public Accounts Committee, said most households had seen 'pitifully small' gains. Older people and less well-off families have been found to be the least likely to have switched to cheaper tariffs.

Mr Leigh called on power industry regulator Ofgem to do more to ensure people were not getting ripped off.

It is thought that many people are reluctant to switch when pressured by door-to- door salesmen. The process is also perceived as bureaucratic and too much hassle.

Callum McCarthy, Ofgem's chief executive, said: 'Domestic customers can benefit from the fall in wholesale prices by switching suppliers and cutting their electricity bills by up to £50.

'We are determined to encourage domestic customers to switch. We have, and will, take action against companies who mis-sell energy or prevent customers switching supplier.'

The Electricity Association, the industry trade body, insisted major price cuts - around 14 per cent - have been passed on since 1998. 'This is a very competitive market,' said a spokesman. 'The level of switching is way above what you would see in banking or telecoms.

'There have been substantial price reductions for domestic consumers.'

Asked why loyal customers were charged more, he said: 'They are supplied on the basis of long-standing arrangements.

'We would encourage people to shop around for the best deal. People who don't do that in any market could end up in that sort of situation.'

Customers may see even higher bills as power companies take action to make up huge deficits in staff pension funds.

Scottish Power said it had a £231million black hole and would call on Ofgem to allow it to make up the shortfall with higher prices.

Last year the company boosted its profits by deciding not to pay into its pension fund because of a £ 130million surplus.