Millions May See Energy Bills Cut Under Reforms

Millions of households with pre-payment meters may see their energy bills cut under reforms sought by the competition regulator in a report highly critical of the Big Six suppliers.

The proposals were revealed following a two-year inquiry by the Competition and Markets Authority (CMA) amid concerns that the household supply market was not working in the best interests of consumers.

The chair of the CMA investigation said it was clear the Big Six had taken their customers for granted.

Roger Witcomb's provisional recommendations included the introduction of a price cap until 2020 for low income and vulnerable customers using pre-payment meters - around 16% of households - with the aim of saving them £300m annually.

The report also outlined proposals to encourage customers to switch providers - a move designed to break the dominance of British Gas, SSE (LSE: SSE.L - news) , EDF Energy, npower, E.ON and Scottish Power.

It (Other OTC: ITGL - news) would force the firms to share customer data so rival companies could contact households directly about electricity and gas deals.

The CMA estimated that customers have been collectively overpaying by around £1.7bn per year and those stuck on standard tariffs could be saving themselves around £300 by switching.

Plans mooted last July for a maximum price limit for standard variable rate tariffs were scrapped.

The move would have seen prices slashed or frozen for around 70% of customers with the Big Six providers.

Last July the CMA found that there was "widespread consumer disengagement" and argued that customers should be encouraged to seek better deals.

:: How To Switch In Seven Simple Steps

But since then, the number of customers shopping around has picked up with the energy regulator recently reporting a 15% rise.

Mr Witcomb said: "We have found that the six largest suppliers have learned to take many of their existing domestic customers – some 70% of whom are on “default” standard variable tariffs – for granted, not just over prices, but with their service and quality".

Energy and climate change secretary Amber Rudd said: "This is a wake-up call to the Big Six.

"Energy customers should get a fair deal from a market that works for them. That's why we called for the biggest ever investigation into the energy market and won't hesitate to take forward its recommendations."

Her Labour shadow, Lisa Nandy, said energy companies were still being "let off the hook" with no transparency over bills.

Will Hodson, co-founder of consumer collective TheBigDeal.com, went further: "The CMA are naive to propose opening a database of customers to energy companies.

"The proposal would take exploited customers out of the pan and into the fire of a thousand cynical sales pitches."

Despite the criticism of the Big Six, shares in the UK-listed firms SSE and Centrica (Amsterdam: CC8.AS - news) - the owner of British Gas - were up in early trading as investors mulled the implications of the report.

Industry body Energy UK said firms recognised the need to put customers first.

Responding to the proposals on the Big Six firms sharing their customer data with rivals via Ofgem, chief executive Lawrence Slade said: "We agree that customers should have the information they need to make an informed choice but would like people to be able to choose if they get marketing information or not.

"The implementation of this proposal will need to be carefully considered to ensure that customers’ personal data and right to privacy remains protected".

A final set of recommendations is due in June.