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Friday, August 21, 1998 Published at 10:39 GMT 11:39 UK

Business: Your Money

Poor lose out on deregulation

Doubts over benefits as electricity regulation looms

Less than a month before the UK's electricity market is to open up to competition, new research suggests that the poor and elderly are losing out in the brave new world of deregulated utilities.

Two new studies agree that consumers will continue to see price falls as deregulation of the telephone, gas and electricity markets beds down but one claims the discounts are not being evenly shared.

A survey by the Warwick University's business school found that while average prices were falling in the de-regulated telephone market most of the discounts are going to affluent customers.

Poor £60 worse off

While poorer households were £60 worse off per year on average, the top 5% of UK households enjoyed most of the benefits.

[ image: Who will save the most from electricity competition?]
Who will save the most from electricity competition?
The study found that telephone companies were giving cheaper rates to richer, higher volume users while those who made fewer calls, typically pensioners, ended up paying more per call.

More discounts also accrued to the well-off when paying their phone bills by direct debit while low-income earners missed out.

Professor Catherine Waddams, a co-author of the report, has called for compensation via the social security system for those who lose out.

Big savings from electricity competition

Meanwhile, a Cambridge University study predicts consumers and small business owners stand to save £300m a year when competition takes hold in the electricity industry.

But Warwick's Professor Waddams believes the inequalities she has so far identified will intensify when competition in electricity supply begins and further deregulation of the gas market takes place.

Around 750,000 household and business customers, 10% of the market, will have a choice of electricity supplier when the first wave of competition rolls into selected locations around Britain from September 14.

They will be able to choose their electricity supplier in the following company areas:

  • Eastern Electricity Norwich, Fakenham, Lowestoft, Cromer (NR postcodes)

  • Manweb Chester, Mold, Holywell (CH postcodes)

  • ScottishPower Motherwell, Airdrie, Lanark (ML postcodes)

  • Yorkshire Electricity Hull, Hornsea, Beverley (HU postcodes)

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