Energy Firms 'Overcharge Up To £330 Per Year'

A lack of regulation and competition in the energy market means that some families pay hundreds of pounds more than they should per year, a think-tank has warned.

Research by the Institute for Public Policy Research (IPPR) found that the gap between the 'true cost' of energy and what all UK consumers pay could amount to as much as £1.9bn by 2020.

They blamed the disparity on lack of competition in the UK market, which is ruled by the "big six" energy firms, and called on the energy watchdog Ofgem to ensure pricing is more fair.

Currently, this means that some UK families are paying as much as £330 more than their neighbours to use the same amount of energy from the same company.

The think-tank said that over five million people could be being overcharged because tariffs are not cost reflective as required by Ofgem, and so-called loss-leading tariffs from the 'Big Six' also prevent competition as smaller suppliers cannot compete.

With annual efficiency savings of 2.5% and profit margins at 4%, it estimates that energy suppliers could drop £70 from the average household annual bill.

The think-tank also found that costs to suppliers of delivering environmental and social obligations may be £9 per customer per year less than estimated by the regulator.

Will Straw, associate director at IPPR, said: "We are calling on the Big Six and Ofgem to demonstrate whether efficiency savings are being achieved in the energy market and whether consumers are benefiting from lower bills as a result, as we would expect if competition was working.

"We need more competition among energy companies so that households get a fairer price for their energy but Ofgem's previous attempts to reform the market have not delivered the changes needed."

The IPPR investigated the costs to energy companies of supplying electricity and gas for the financial year 2011/12, and modeled a number of scenarios to see how different levels of competition in the supply market could affect energy bills in 2020.

Meanwhile, campaigners have warned that parts of Britain are in danger of being overrun by wind farms because of the huge increase in the number under construction.

The Campaign to Protect Rural England said the number of turbines over 30 metres high either already built, in construction or awaiting approval has soared to more 4,100 from just 685 in 2008.