Energy companies have insisted controversial rises in bills were partly down to green taxes but stood accused of charging customers “the maximum price they feel they can get away with”.
Rising wholesale costs and and environmental “stealth taxes” were behind the average 9.1 per cent hike announced by some major firms, the Energy and Climate Change Committee was told.
But the businesses practices of the “Big Six” was called into question by small scale competitor Ovo Energy.
Managing director Stephen Fitzpatrick told MPs he “can’t explain” the price rises being imposed because his company was buying gas at a cheaper price - 5p a therm less - than it had in 2009.
Loyal bill-payers are charged are a far higher rate, in some cases £200 more, and loaded with environmental costs than those who switch but the companies responsible go “unchallenged” by Ofgem, he said.
“It looks to me like a lot of energy companies, a significant number of the Big Six, are charging the maximum price they feel they can get away with to the customers that they feel will not switch under any circumstances and then maintaining the illusion of competitive pricing with tariffs targeted towards a very small number of relatively well-engaged customers,” he told MPs.
“In the case of npower, which is the worst offender, historically and today the price differential is about 16%, which is about £200.”
He accused British Gas of being the “most active” in terms of running a dedicated “win back team” whose sole job was to call up customers that were leaving to say ‘now we can cut your bill’.
“When this kind of behaviour is allowed to go unchallenged, and an ex-monopoly advantage that the Big Six have, is allowed to go unchallenged by Ofgem, then you will never get effective competition.
“If you don’t have effective competition in a retail market then you are always going to be trying to find out where the money has gone and time and time again you will hear very clever, very complex, very confusing answers and you will never get to the bottom of it. Effective competition is the only solution to lower bills.”