Publishing its initial findings following a year-long investigation into the energy market, the CMA said that between 2009 and 2013, customers of the Big 6 energy firms – British Gas, nPower, Scottish Power, SSE, Eon and EDF Energy – paid around £1.2bn more annually than they would have had competition in the market functioned more effectively.

The report found that dual fuel customers could save an average of £160 a year by switching to a cheaper deal. About 70% of customers are currently on the ‘default’ standard variable tariff (SVT) despite the presence of generally cheaper fixed-rate deals.

Lack of awareness of what deals are available, confusing and inaccurate bills and the real and perceived difficulties of changing suppliers all deter switching, the CMA found.

“There are millions of customers paying too much for their energy bills – but they don’t have to,” said Roger Witcomb, chairman of the energy market investigation.

“Whilst competition is delivering benefits to increasing numbers of customers, mainly through the growth of smaller suppliers with cheaper fixed-price deals, the majority of us are still on more expensive default tariffs.

“Many customers do not shop around to see if there’s a better deal out there – let alone switch. The confusing way energy is measured and billed can make comparing deals understandably daunting.”

The CMA has produced an initial list of possible measures which could increase competition and ensure a better deal for customers. These include a transitional price cap on the most expensive tariffs and the roll out of smart meters.

Commenting on the report, Lawrence Slade, chief executive of Energy UK, the body which represents the major suppliers, said: “The energy industry recognises the need to put customers first while delivering secure, affordable and cleaner energy.

“Customers can save money when they shop around for deals that suit their individual circumstances.”

However, Ann Robinson, director of consumer policy at uSwitch.com, said: “Millions of consumers have been disconnected from the energy market for years. They have switched off from thinking about energy – putting up with poor service and unnecessarily high bills.

“The CMA is absolutely right to focus on addressing low levels of engagement to boost competition and help make the market work for consumers.”