WORCESTER'S electricity supplier has denied it is ripping customers off following a damning report that claims customers are being overcharged.

npower disputed the National Audit Office report, which claims energy firms are passing on only a fraction of a 40 per cent fall in wholesale electricity prices.

The Warndon-based firm employs 560 people and supplies power to more than one million customers across the West Midlands.

The report also says two thirds of British households are losing out because they have stuck with their existing regional supplier rather than shopping around for a cheaper deal since the market was opened up to competition in 1990.

But Jennifer Corby, spokeswoman for the company, said npower's customers were paying a competitive price for their electricity.

"They pay less today than they did 10-years ago," she said.

"In fact, a reduction of one third in real terms."

Fallen

She said although wholesale electricity costs had fallen, they represented only 40 per cent of the total costs of running the business.

"Distribution costs add a further 29 per cent and other costs, including the Government's energy-efficiency and renewable programmes, have risen."

She also disputed the report's claim that loyal customers in an energy supplier's own area often paid a lot more than new customers in other parts of the country because they were offered lower tariffs to lure them in.

"It is not true to say that we charge our loyal customers excessively," said Ms Corby.

"On average our customers across the UK pay £233 a year. Our customers in the Midlands area pay within £10 a year of this average.

Our cheapest area is £25 cheaper and our most expensive area is £25 more expensive. This variation in prices reflects varying distribution costs and competitive pressures."

The report said households who had not switched supplier had average quarterly bills up to 15 per cent higher. Reasons for not changing supplier included being turned off by pushy door-to-door sales people, and the fact customers thought it would be too much hassle.

"So long as the proportion of customers still with their original supplier remains relatively high, the competitive pressure on suppliers to reduce the prices they pay may be limited," said a spokesman for the National Audit Office.

But Ann Robinson, chairman of EnergyWatch, said Britain's 24 million electricity consumers were "at the sharp end of a blatant price rip-off".

"I am furious that these price reductions have not been passed on," she said.

"It is morally and ethically wrong."