Ofgem 'should be scrapped' for failing poorest customers - NHF » Housing » 24dash.com

Ofgem has failed some of the poorest customers in the country and should be ‘scrapped’ says the National Housing Federation, in response to the energy regulator’s initial report on its energy market probe.

Ofgem said this week that the big energy companies should stop charging poor people on prepayment meters more for their gas and electricity – but has chosen not to compel them to stop the prepay meter ‘rip off’.

Instead, it is asking the companies to tackle the issue voluntarily – and plans to consult on its plans for at least two months.

In response, the Federation, today unveils new figures which show why compulsory action should be taken immediately.

The Federation figures show that for every month that no action is taken prepayment meter users will pay:

• £113m more than those on the best deals available.

The Federation also reveals that for every year the situation continues, prepayment meter customers will pay:

• £1.3bn more than those on the best deals.

 Federation Chief Executive David Orr said: “The announcement today by Ofgem that it is going to consult over the introduction of a voluntary scheme to end the prepayment meter rip off is deeply disappointing – as it means that the plight of some of the poorest in society will drag on for at least several months yet.

“This was Ofgem’s big chance to show that it was a regulator with teeth but it has fluffed it. Asking fat cat energy companies to do the right thing by the fuel poor is like asking Dracula to look after a blood bank.

He added: “Our figures show that for every month the prepayment meter rip off is allowed to continue, prepay users are paying £113m more than those on the best deals available – and that if the situation drags on for another year, prepay users will pay £1.3bn more than those on online direct debit deals.

“Ofgem’s report accepts that some of the poorest customers must always pay more for their energy. We say this means there is something fundamentally wrong with the market – and that’s the question that the new Secretary of State for Energy must address.

"One of the first things he should do is disconnect Ofgem and replace it with a regulator with teeth.”

The Federation has also revealed that the difference between sums paid by prepay meter customers and those on cheaper direct debit deals has increased by 500% since Ofgem was set up – even though it claims ‘consumer protection’ is its first priority.

New figures show that when Ofgem was set up in 1999, the poverty premium – the difference between the average charge made to prepayment meter customers and those on the best deals available – was £78.

However, today the average differential between prepayment meter charges and the best available is £359.

There are almost six million prepayment meter users, with an average household income of £16,000 per year. Although most of them are from vulnerable backgrounds most big energy firms charge them more than any other customers.

British Gas charges its prepayment meter customers up to £538 more than its online direct debit customers, while Scottish Power charges prepay customers up to £377 more.