Ofgem lifts last controls on energy prices

Consumer groups attacked Ofgem, the energy regulator, for lifting the last remaining price controls on the gas and electricity industry.

Consumer groups attacked Ofgem, the energy regulator, for lifting the last remaining price controls on the gas and electricity industry.

Ofgem said there was now so much competition in domestic gas and electricity that price controls were unnecessary.

This was fiercely disputed. Energywatch, the consumer watchdog, said the move was a "recipe for misery" for the five million customers who have pre-paid meters for gas and electricity and who are already paying some of the highest prices for their gas and electricity. Around half of pre-payment users are on incomes of less than £12,500.

The group said: "Energywatch sees no reason why PPM [pre-paid meter] bills will fall as there is little competition in the sector and, therefore, no commercial incentive for companies to narrow the difference between the prices paid by PPM users [and others]."

The Consumers' Association also said it was not convinced that it was time to lift price controls. Adam Scorer, its public affairs officer, said: "This is a long way short of being a perfect market. Many consumers are still prevented from switching suppliers because of small amounts of debt owed to energy companies. Half the consumers who switched have done so without being able to effectively compare prices."

Monica Giulietti, senior research fellow at the University of Warwick's Business School, said the fact that 20 listed electricity suppliers continued to survive showed the market is not very competitive. "A majority of customers are willing to tolerate the incumbent's prices being substantially above entrants' prices. As a result, the market is unlikely to become very competitive unless people's views about the reputation of new suppliers change."

Ofgem said 38 per cent of electricity and 37 per cent of gas customers have switched suppliers. Critics pointed out that this meant most consumers had not switched or not been able to change supplier, despite the substantial savings available.

Ogem's chief executive, Callum McCarthy, said: "The focus of Ofgem going forward will increasingly be on monitoring competition and using competition law to tackle market abuse."