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Major energy suppliers accused of treating customers like 'chumps'

Major energy suppliers have been accused of treating customers like "chumps" as senior MPs called for a relative price cap to prevent households from being ripped off.

Tory former minister John Penrose said more than 20 million UK households had fallen victim to "rip-off deals" from Big Six energy firms, who are "exploiting a back book of long term customers to stay fat and happy".

He led calls for a relative price cap to help control the market, which would set a maximum mark-up between each energy firm's best deal and their default tariff.

Mr Penrose, speaking during a backbench debate on the matter, said: " What other industry doesn't give their most loyal customers any discounts or special deals but charges them higher prices than anyone else instead?

"Which companies believe that loyalty should be exploited not rewarded?

"Who treats their longest-serving customers as chumps to be quietly and secretively switched on to expensive and unfair deals when they aren't looking and then milked, ripped off mercilessly for as long as possible?

"The Big Six energy firms, that's who."

Mr Penrose told MPs that switching deals must be made easier for consumers and called for measures to ensure customers can allow their data to be shared more easily between energy companies.

Labour's Iain Wright (Hartlepool) backed calls to bring in a price cap, saying the energy market was "not working in the interests of customers".

Mr Wright, who chairs the business, energy and industrial strategy committee, told MPs: " Customers are literally paying the price for the failure of energy companies to manage their businesses and control their costs.

"It's not just about cost, this is about customer service and lack of trust in energy companies as well."

He said consumers should "switch, switch, switch" but protections should also be put in place to ensure a fair deal for those who cannot change their deals.

It comes after most of the major suppliers announced significant price increases, despite the energy regulator Ofgem recently saying it saw no reason for the Big Six to raise prices.

Independent supplier First Utility released figures before the debate, saying millions of UK households have spent £7 billion more in total than they had to on energy over the last three years, based on its analysis of data from the switching site Energy Helpline.

The supplier said the overspend was because 85% of energy customers are with the Big Six and, of those, 70% are on the most expensive standard variable tariff.

Labour former minister Caroline Flint compared the lack of action over energy bills to Groundhog Day.

She said: "One of my favourite comedies is Groundhog Day, in which the character played by Bill Murray has to replay a single day until he sees the error of his ways.

"Well, for me, today feels like Groundhog Day again - reliving the same arguments about our uncompetitive energy market, their poor customer service and ripping off of customers on standard variable tariffs, points I have been making for the past six years.

"The ministers keep changing but I'm still here and I hope today the minister, like Bill Murray in the film, will break this spell."

Shadow energy minister Alan Whitehead said energy companies were trying to have their cake and eat it when it came to price rises.

He added: "The problem is of course we're not sure where the cake is, and how we can work out which bits of the cake do indeed come from which source because the whole energy market as it stands is just non-transparent."

Labour would support a price cap that still allowed elements of competition, he added.

Business minister Jesse Norman said it was "not acceptable" that five of the largest energy suppliers were increasing their standard variable prices.

But he said that while prices were rising, electricity bills had risen "very little" over the past 25 years given improvements in things like insulation.

Mr Norman said price rises within the energy market are "not inevitable" and there is now more competition in the sector.

He said: "There has been some progress and I think members rightly point to the fact that there are now over 50 energy suppliers in the domestic market - up from 13 in 2010 - and there of course are the potential new entrants including local authorities waiting in the wings."

He said the Government is working hard to make switching energy companies quicker and easier and he hoped to make it possible to switch within 24 hours.

"That I think will be a major improvement to our system," he said.

Mr Norman reiterated the Government's commitment to intervene in markets which are not working effectively.

"Where those markets are not doing their job, where competition is not effective then the Government will look to intervene to improve competition and to strengthen outcomes," he said.

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