Industry executives forecast yesterday that price cuts would be less than half the value of those that followed gas liberalisation, with electricity customers likely to see the average pounds 250 bill fall by about pounds 25, or 10 per cent. When British Gas's domestic monopoly was ended, consumers enjoyed price reductions from rival suppliers of as much as 25 per cent.
The smaller number of customers expected to switch is due to a combination of consumer inertia and the fact that the level of savings is lower, said John Roberts, president of the Electricity Association and chief executive of Hyder Utilities.
However, another reason for the more limited price reductions is that the industry is being allowed to pass on the pounds 726m cost of gearing up for liberalisation to its 26 million domestic and small business customers. This works out at just under pounds 28 per customer.
The first phase of liberalisation goes live on Monday when 750,000 households in the areas covered by Manweb, Scottish Power, Eastern and Yorkshire will be allowed to shop around for a different supplier. The rest of the country will be opened up to competition in phases, with all areas taking part by Christmas and the exercise completed by June.
However, apart from the 12 regional electricity companies in England and Wales and the two Scottish suppliers, only two other groups have applied for licences to supply the domestic market - Centrica, which trades as British Gas, and Independent Energy.
In an attempt to avoid the high-pressure selling techniques which accompanied the opening of the gas market, energy companies have agreed a voluntary marketing code. This covers doorstep selling and requires suppliers to give written quotations and like-for-like price comparisons with current charges.Reuse content