Energy firms 'charging loyal customers £90 extra'

The biggest companies add a surcharge to the tariffs of customers they inherited from their time as monopoly suppliers, meaning these households pay more for their energy than they need to, the think-tank IPPR claims (join our free Cheap Energy Club to find your best deal).

Before the energy market was opened to competition during the 1990s, there were 14 regional electricity suppliers and one national gas supplier, British Gas. These operated as regulated monopolies.

Gas bills for those who had not switched away from British Gas since the market was opened to competition were on average £76 higher in 2013 than for customers who had switched – almost treble the difference recorded in 2010.

The disparity in gas prices was greatest for those who pay their bills by direct debit, with a difference of £89 between those who had and hadn't switched.

Electricity bills were, on average, £27 higher in 2013 for customers who had not switched away from their local supplier.

'Competition is failing'

IPPR senior research fellow Reg Platt says: "Competition is failing in the energy markets.

"Our new analysis shows how the biggest energy companies add a surcharge to the tariffs of customers that they inherited from their time as monopoly suppliers.

"This means that these customers pay more for their energy than they need to. It also means smaller suppliers are at an unfair disadvantage because they have not inherited any customers and must compete against the low prices that the big companies offer to people who have switched."

Ian Peters, managing director of residential energy at British Gas, says: "British Gas offers exactly the same tariffs to our loyal customers and our new ones. We also proactively contact all our customers with a personalised "Tariff Check", to tell them if we can offer them a better deal. Next month, we will go one step further, and provide a cost comparison in every customer's bill.

"Within the current limits set by the regulator, we have a range of tariffs available at different prices, with fixed or variable options depending on the customer's preference."