The evidence is overwhelming that competition is effective across all social groups and all methods of payment

Callum McCarthy, Ofgem

The watchdog is worried that those customers using pre-payment meters will lose out.

Ofgem said it was confident that competition within the energy sector will keep prices under control, and reaffirmed its commitment to protect vulnerable customers.

But Energywatch said the move was a mistake.

"I am appalled that short-sighted market dogma has won out over the need to protect vulnerable energy consumers," said the head of Energywatch Ann Robinson.

"Ofgem has taken a wholly unjustifiable leap of faith that the market, left to its own devices, will deliver for pre-payment meter users."

Competition 'effective'

Ofgem announced its intention to remove all remaining price controls last November, and has now said the controls will be lifted from the beginning of April this year.

It said that the level of competition within the industry was sufficient for price controls to be lifted.

79% of people with gas pre-payment meters are with British Gas - that's a virtual monopoly

Ann Robinson, Energywatch

"The evidence is overwhelming that competition is effective across all social groups and all methods of payment," Ofgem's chief executive Callum McCarthy told BBC Radio Five Live.

"The combination of competition and tough regulation of the networks has brought gas prices down by nearly 40% and electricity prices down by nearly 30% since privatisation."

Ofgem also said the number of people switching suppliers - including pre-payment customers - showed competition was working.

It said 15 million customers have switched suppliers with 170,000 changing firms each week.

Price fear

But Energywatch disputed Ofgem's findings, saying that pre-payment customers only accounted for a tiny percentage of customers who Ofgem had surveyed.

About 1.8 million people use pre-payment meters for gas, and 3.7 million for electricity.

"79% of people with gas pre-payment meters are with British Gas - that's a virtual monopoly," Ann Robinson told Five Live.

"On gas pre-payment meters 64% (of customers) are in debt and they can't move, so how is competition working for them?"

And Energywatch said the only reason why pre-payment bills had been cut was because of the price controls imposed.

"I have a real fear that we will see energy suppliers put up prices for this important group of consumers," Ms Robinson said.

Minister 'concerned'

The Energy Minister Brian Wilson said he also had his doubts about Ofgem's move.

"Both MPs and consumer bodies have voiced concerns about the degree to which the market is competitive, particularly for consumers with pre-payment meters and for those in debt."

"I share those concerns and have made that clear to Ofgem."