Energy customers are being overcharged an estimated £1.6 billion a year as providers are failing to pass on the falling prices they pay for energy to consumers, it is claimed.

That equates to an average £74 per household.

Analysis by lobby group Consumer Focus also reveals current gas prices should be at least £60.10 cheaper per household, and electricity bills £13.80 lower.

Wholesale prices, the price power firms pay for energy, have fallen by around 50% over the past year, yet gas and electricity prices are down by no more than 10%.

More cuts necessary

The research also suggests that additional price cuts of up to £65 for gas and £17.80 for electricity should be made by the end of the year, if market conditions do not substantially change.

Philip Cullum, from Consumer Focus, says: "The energy companies are pocketing £1.6 billion extra, while millions of households struggle to make ends meet.

"Energy firms should take immediate action to put things right for their customers. A failure to act, and to ensure that people pay a fair price for energy, could have serious consequences for the sector."

Our view is that while prices should be lower, it's not that simple. Meanwhile, it's crucial to check if you’re on the cheapest-possible tariff to keep a lid on costs.

Switch provider

Martin Lewis, creator, says: "The amount Consumer Focus says is being overcharged is less than the amount someone could save by comparing, ditching and switching. The lesson is to ensure you're on the best tariff.

"An energy firm's job isn't to keep us warm, it's to make money for shareholders. If we want to complain about prices we need to turn to our regulators and politicians.

"Yet we have to examine this idea energy prices must accurately map the wholesale price. The end result is price fixing and no competition."

Energy-efficient measures

Energy firms have hit back at Consumer Focus’s claims. Garry Felgate, head of the Energy Retail Association, which represents firms, says: "It is misleading of Consumer Focus to suggest that consumers are being overcharged.

"The amount of gas and electricity a customer uses can form as little as half their annual bill.

"The remainder includes other costs, such as transporting gas and power around the country and meeting the Government's carbon emissions reductions targets – all these costs have risen sharply in recent years. Consumer Focus has ignored these facts during its research.

"Since the start of this year, all the major energy suppliers have reduced prices, and they are investing around £4 billion over the next three years in energy-efficient measures."

Further reading

Find out how to slash energy costs in our Cheap Gas & Electricity guide