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Energy overcharging ‘costs us £50 a year’

Thermostat control with pound signLabour claims that consumers are losing out because energy companies buy overpriced electricity from their own subsidiaries.

Opposition politicians claim that overcharging by energy companies has cost the average family £50 a year since 2010.

Labour has this week said that the total extra cost of excessively high prices over the past three years could be almost £4 billion.

‘Paying over the odds’

The party said that the UK’s leading energy firms have been buying electricity at above the market price.

Caroline Flint, Labour’s shadow energy minister, said that the companies had deliberately paid over the odds because in many cases they also run the power-generating firms.

"These figures reveal the full extent of the way consumers have been overcharged for their electricity," Flint said.

Blame on wholesale costs

"Energy companies always blame wholesale costs when they put up bills, but it now looks like they’ve deliberately inflated prices to boost profits from their power stations.

"The regulator Ofgem has serious questions to answer about why it has failed to monitor the way in which companies have bought electricity from themselves.

"And why it has allowed these companies to overcharge their customers."

Labour said it wanted the major suppliers to be split up into smaller units.

Flint added: "The time has come for a complete overhaul of our energy market.

Break-up of big energy firms?

"Labour will break up the big energy companies, put an end to the secret deals and force them to do all of their trading on the open market."

However trade body Energy UK, which represents the country’s gas and electricity suppliers, said that Labour’s figures did not give a fair picture.

A spokesman added: "Energy suppliers pay the most competitive price they can for the gas and electricity they purchase.

"The overall costs of wholesale energy, published by Ofgem from the segmented accounts it gets from the large energy companies, include a number of costs so are not purely market prices.

‘Not a true picture’

"Also, as suppliers buy their energy ahead so it’s there when customers want and need it, averages in this area don't give the true picture."

There was good news for consumers this week, however, as Ofgem’s rules on making energy tariffs easier to understand came into effect.

Suppliers can now only offer four different gas and electricity tariffs.

Each must have a single unit rate, with an optional standing charge on top.

Reforms to add clarity

From the end of March, further reforms mean that providers will have to tell customers which of their tariffs is cheapest, and how much they could save by switching to it.

Kate Rose, head of energy at, said: "The changes that have come into effect this week will no doubt go a long way to helping consumers feel less daunted by the process of choosing a new tariff.

"However there is still more to be done and while the changes will help, some of the changes due to come in to effect in March may result in households missing out on the larger savings achievable through switching.”

She explained: "The best way to ensure you are on the cheapest tariff remains to use a comparison site that compares the whole market.

"This is because the largest savings can sometimes be achieved by not just switching tariff but switching to a new supplier."

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris