The Great British Power Swindle: Consumers are being charged 10% ‘local loyalty tax’ on electricity bills

24 August 2007
UK electricity companies are making an extra £446 million year out of consumers through their old regional monopoly status – around £32 a year on average per customer according to new figures.

The research carried out by has found that power suppliers are operating a regional pricing policy for electricity – and charging customers different rates for exactly the same service according to where they live – for some, that means a charge of up to £54 (around 16%) more than other customers in different regions of the UK.

The study has revealed that in ten out of the14 electricity regions across the country, the previous monopoly supplier is more expensive than every one of its competitors in its ‘home’ region and currently 53% of all electricity customers are still paying for their power with an old regional supplier.

It seems that suppliers are exploiting consumer apathy by charging higher prices in home regions where consumers are likely to remain loyal to a familiar brand while offering cut price rates to other area of the UK.

Ann Robinson, Director of Consumer Policy at, explains: “Tacticalregional pricing is a tax on loyalty. Electricity suppliers are treating local longstanding customers like cash cows, using them to subsidise the more competitive prices they are offering to new customers in other regions. Suppliers know they’re onto a good thing – that’s why they’re thinking of introducing a regional pricing policy for gas too.

“At the moment tactical regional pricing works against consumers and in favour of electricity suppliers because around half of households are still with their original local supplier. The tables are very easily turned though. With savings of around 16% on offer consumers just need to take advantage of one of the many cheaper deals available from competitors. Most people could actually take pot luck in switching to another electricity supplier in their area – there is a four in five chance that they will save money without even doing any homework.”

The u-Switch study found the worst culprit to be npower which currently charges a ‘loyalty tax’ of 14% meaning that those in the home regions pay an average of £398 a year, £54 more than its other customers who already pay £344 despite being on an identical price plan and using the same amount of power. Powergen, however, is proving to be the fairest supplier with a £3 premium charge levied on customers in its old monopoly regions.

And now British Gas is thinking of following suit and bringing in regional pricing for gas too which could see customers paying over the odds in loyal areas and those regions that British Gas wants to target will be offered attractive deals in order to get them signed up.

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