Electricity pricing slammed in report

The National Audit Office (NAO) has said that customers who stick loyally by electricity suppliers could be paying much more than those who regularly shop around.

According to a report presented to Parliament today by Sir John Bourn, the head of the NAO, there has been a fall in the wholesale price of electricity, but the impact on the bills paid by many domestic consumers has been more limited.

The report indicates that, since 1998, when New Electricity Trading Arrangements (NETA) was first considered, prices for loyal domestic consumers have fallen little – but those who have moved around have seen drops of up to 17%. NETA is a complex project, which went live in 2001, to reform the way that electricity is traded in England and Wales.

Nearly 40% of electricity customers have switched supplier but, says the report, the "apparent reluctance of others" may have dampened price competition – so enabling suppliers to charge up to 22% more to consumers with their original supplier than they charge to attract new customers.

According to the NAO, wholesale electricity prices have fallen by around 40% and industrial and commercial users have seen "significant falls" in prices of up to 18% since the start of NETA.

The report recommends that Ofgem should keep under review why domestic consumers who have not switched supplier have benefited much less than other consumers from falling wholesale prices.

Sir John Bourn, head of the National Audit Office, said: "Ofgem, together with the electricity industry, has achieved much through the NETA programme of reforms. But my report shows that there are a series of questions that the regulator will need to continue to keep under close scrutiny. How much of the savings in the wholesale market will be passed on to retail customers? How sure can we be that the lights will stay on? And can Ofgem monitor the market so as to prevent market abuse distorting prices?"

(GMcG)