Energy companies have been overcharging customers

An investigation done by the Competition and Markets Authority (CMA) discovered that millions of households have been paying too much on their energy bills. This may be one of the largest rip offs in the history of the UK in that the extra amount that customers has been paying is over £1 billion a year going back to 2009.

This discovery, and the new regulations that will result from it, may lead to around 70% of households across the UK receiving a reduction in their monthly utility bills. All six of the countries major suppliers, known as the Big Six, have been found to be overcharging people, therefore millions of customers will benefit from all area. This may lead to some families being able to afford their bills in the future rather than have their electricity turned off.

The industry has not been competitive, which may not be a surprise to many families. There are two few big companies, such as EDF Energy, and not enough smaller providers. This has lead to prices being 5% too high per the assessment done by the Competition and Markets Authority.

One big reason for the lack of competition and overcharging has been the tariff system. Most households have not been aware of the fact they can seek a lower price, or they have not taken the steps to do this. It is estimated that over 70% of households across the UK have not shopped for the best deal on their electricity bill.

Some of the energy providers, such as ScottishPower, have not been notifying people of the fact they are being charged too much. Some experts argue that the companies even discourage someone from changing a tariff. Instead those people are kept on the standard variable payment plan, which is the most expensive programme in place. Whether this is a scam or not, others may need to judge. But the fact is these providers knew that people are not on the cheapest plan.

The CMA also is placing blame on the government. As an example of one agency creating additional financial challenges for many people, the Department of Energy and Climate Change has a programme that encourages offshore wind development. To pay for this, most people are charged an extra fee each month. So the offshore industry is getting a subsidy often at the expense of families that are struggling just to pay their bills and feed their families each month.

The end result of all this is that customers may soon see a reduction in their utility bills of around £160 per year. This will occur as the CMA is stating that customers will be automatically placed into a so called “safeguard” tariff, which will set a maximum amount that they can be charged on their bills. This will prevent the energy companies, such as British Gas or E.On, from ripping-off customers.

Companies will also need to start to support people switching tariffs to save money. They will also need to ensure that families on a low income have information on the assistance available to them, such as programmes for paying utility bills.

Other regulations which may result from this CMA review include the increase competition in energy markets as well as roll-out of smart meters. All of these will result is savings to millions of families.