Labour has called for an immediate freeze on all household energy bills after the launch of an inquiry into the Big Six power companies.
Ofgem, which regulates the gas and electricity markets, paved the way for a full-scale competition investigation yesterday, as it emerged that profits in the sector had quadrupled to more than £1billion in just three years.
Ofgem said an investigation by the Competition and Markets Authority would “consider once and for all whether there are further barriers to effective competition”.
Energy prices have been the subject of fierce political debate since October, when Labour pledged it would implement a price freeze if it won the 2015 election.
Last night, shadow energy secretary Caroline Flint seized on Ofgem’s move, insisting that the coalition should freeze prices now.
She said: “The public want radical action to reform the energy market – as Labour has proposed – but whilst this review takes place, quite rightly they want to know what help they can expect now.
“If I was standing where the secretary of state is stood today I would be taking action to impose a price freeze for all consumers.
“Instead of defending the Big Six and asking for their co-operation, why doesn’t he just enforce a price freeze right now?”
SSE, one of the Big Six, announced plans this week to freeze prices until 2016.
Announcing plans for the inquiry yesterday, Ofgem said: “Profit increases and recent price rises have intensified public distrust of suppliers and highlight the need for a market investigation to clear the air.”
It has launched a consultation on its proposals which it must complete before a final decision on referring the sector for investigation.
Citizens Advice chief executive Gillian Guy said: “Households have been bearing the brunt of a failing energy market for too long. We’ve been calling for a competition inquiry since 2007.
“It’s important this long-awaited investigation gets to the root cause of rising prices and results in a competitive and transparent market that works for all consumers.”
Energy Secretary Ed Davey said: “This is tough action based on a detailed independent expert assessment of the state of competition in Britain’s energy markets – leading to the first-ever market reference for the energy markets.”
It is understood the review could take up to two years to complete. Scottish Gas owner Centrica welcomed an independent review “free from political interference”, but said competition in the market was already “intense” and rejected the suggestion there might have been “tacit co-ordination” with rivals to boost profits.
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