Energy firms 'face profits crackdown'

Chancellor Alistair Darling is to crack down on energy companies profiting from those in fuel poverty when he delivers his first Budget later this week.

Darling is reportedly set to announce on Wednesday that the Government will use legal powers to control the tariffs paid by an estimated 3.8m electricity customers and 2.8m gas customers who use pre-payment meters.

The measures are thought to be planned to stop energy firms making an alleged £400m in excess profits from the country's poorest consumers, according to the Financial Times.

It is understood that talks have stalled over a voluntary scheme which would see suppliers put cash into cutting bills for low-income households.

The Government is now aiming to use powers under the Electricity and Gas Acts to curb pre-payment tariffs as a first step to tackle fuel poverty, said the FT.

The news will come as a further blow to the energy industry after regulator Ofgem last month announced an investigation into the UK's gas and electricity markets in the wake of a series of price hikes.

Providers have been accused by consumer watchdogs of failing to meet the needs of the estimated 4.5 million people in fuel poverty, defined as those who spend more than 10 per cent of their income on heating and lighting.

Energywatch last week claimed that suppliers are charging pre-pay meter users an average of £255 a year more than online customers.

The group said energy firms were making £400 million in profits from the pricing system, effectively penalising poorer households and pensioners, with one in three households in fuel poverty thought to have a pre-payment meter.

Business Secretary John Hutton is also expected to announce new guidelines today for Ofgem to ensure that poorer consumers have adequate information to switch suppliers.

Image: Alastair Darling is to crack down on energy companies

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