A new report has found that “millions” of people are paying too much for their energy.

The CMA – Competitions and Markets authority – has published its provisional findings after a year-long investigation into the energy market.

Key findings:

• The average household currently spends about £1,200 on energy each year
• For the poorest 10% of households, energy bills now account for about 10% of total expenditure
• An extensive survey of 7,000 people in Great Britain found that over 34% of respondents had never considering switching provider
• Dual fuel customers could save an average of £160 a year by switching to a cheaper deal
• About 70% of customers are currently on the ‘default’ standard variable tariff (SVT) despite the presence of generally cheaper fixed-rate deals
• Lack of awareness of what deals are available, confusing and inaccurate bills and the real and perceived difficulties of changing suppliers all deter switching
• Domestic gas and electricity prices have increased significantly over the last ten years. Average domestic electricity prices rose by around 75% in real terms between 2004 and 2014, and average domestic gas prices rose by around 125% in real terms over the same period
• There have been considerable concerns about the quality of service offered by the Six Large Energy Firms. The number of recorded complaints increased fivefold between 2008 and 2013. Problems related to billing, customer services and payments accounted for the majority of complaints.

Roger Witcomb, Chairman of the energy market investigation, said: “There are millions of customers paying too much for their energy bills – but they don’t have to.

“The majority of us are still on more expensive default tariffs. Many customers do not shop around to see if there’s a better deal out there – let alone switch. The confusing way energy is measured and billed can make comparing deals understandably daunting.

“The result is that some energy suppliers know they don’t have to work hard to keep these customers. It’s notable that there are such high levels of complaints about customer service.

“However, there are other maybe less visible factors which can have just as significant an effect on bills. We don’t think that regulatory interventions have always benefitted competition and customers. Technical issues around measurement of consumption and pricing and the slow process in introducing changes that could bring widespread benefit can also play a part.

“We want to look at ways we can make customers more active. Smart meters have the potential to transform customer understanding and engagement and their speedier introduction could have particular benefits for prepayment customers, who undoubtedly get the worst of things at present. We want to look at technical and regulatory reforms further up the chain that could also benefit competition and the customer.

“These measures can and will help deliver change but we are also aware that we cannot expect an overnight transformation. Many customers could continue to overpay for an essential product. For the poorest 10%, energy bills make up nearly a tenth of their total spending. So as well as helping customers become more active we want to consider carefully whether some sort of protection is warranted whilst other changes take effect. We wouldn’t introduce such a move lightly and would need to consider its effect on competition but it is something we feel is right to look at closely.”

In response to the provisional findings, Amber Rudd, Secretary of State for Energy and Climate Change said:

“Our priority is to keep bills down for hardworking families and businesses across the country. We’ll consider the report and respond soon and we won’t hesitate to take further action where the market is not delivering a fair deal for consumers – including doing more to support switching, ensure the swift roll-out of smart meters and increase competition in energy markets.”