The energy secretary has warned that Britain’s big energy suppliers risk being broken up after the competition regulator said they charge loyal, often vulnerable customers up to £234 a year more than those who shop around.

In a progress report on its investigation into the energy industry, the Competition and Markets Authority (CMA) found that 95% of dual fuel customers on standard variable tariffs could have saved £158 to £234 a year if they had switched provider between early 2012 and early 2014.

The CMA said customers who did not switch were more likely to be on low incomes, to be over 65, and living in social housing and without qualifications. Customers on standard variable tariffs were also more likely to be disabled, a single parent and struggling financially.

The result is that the big suppliers – SSE, Scottish Power, British Gas owner Centrica, npower, E.On and EDF Energy – are likely to exercise market power over those customers, the CMA said.

“We have observed that the six large energy firms have consistently charged higher prices for the SVT for gas and electricity compared with non-standard tariffs, which provides some support for the view that these suppliers can segment the market and price discriminate,” the regulator said.

Ed Davey, the energy secretary, said the government had encouraged new smaller providers to set up but that tougher action may be needed, including breaking up companies that between them control about 92% of the energy supply market in the UK.

“What I’m looking forward to with this inquiry is to see evidence of whether we need to go further and faster and we won’t flinch if that is what’s needed. If some of the energy companies are abusing their market power I think that is actually wrong … because they are giving the best deals for new customers and not sharing some of the benefits with their loyal customers,” Davey told the BBC Radio 4’s Today programme.

“I’ve always said if there needs to be further action I certainly wouldn’t shrink from seeing an energy company broken up but that has to be done with real evidence. If the evidence from the CMA is that the next step ought to be broken up, I as a Liberal Democrat will make it clear we wouldn’t flinch from taking that tough action.”

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The CMA found that customers were unlikely to switch from their established provider.



About 40% of domestic gas customers at Centrica, owner of British Gas, have been with the company for more than 10 years. About 40% to 50% of domestic electricity customers of big suppliers have been with their provider for 10 years or more, apart from one supplier where the proportion is 60% to 70%.



The CMA launched its investigation last July after a referral by the energy regulator, Ofgem. Last month, Ofgem said the big suppliers were using the falling price of gas to increase their profits despite announcing a wave of cuts to customer bills.

Energy companies have rejected Ofgem’s calculations but the CMA said its initial view was that the widening gap between wholesale gas prices and household bills indicated a lack of competition.



Energy prices are high on the political agenda after the Labour leader, Ed Miliband, used his 2013 conference speech to say the party would freeze prices if it won the election. High energy costs have contributed to the squeeze on household budgets.

Richard Lloyd, the executive director of the consumer group Which?, said: “This is a watershed moment for the energy market as the CMA confirms what we’ve known all along: that competition is not working for consumers.

“The Competition and Markets Authority now needs to develop a set of solutions to repair the market and make it work for everyone, not just the suppliers. This must include establishing a fair price that people can trust, to restore consumer confidence in the energy system. Consumers will also be looking to politicians of every party to set out how they’ll deliver fair and affordable energy prices in the future.”

The CMA said it had not yet reached any conclusions. It will publish its provisional findings in May.