Energy watchdog tells big firms: cut prices or else

Big Six suppliers could face mandatory price controls, says Ofgem, as public anger mounts over exorbitant fuel bills

A cap on fuel bills could be introduced for the first time in more than a decade amid rising concern that customers are being ripped off by the Big Six energy firms, the regulator Ofgem has told The Independent.

The dominant companies – EDF, E.on, British Gas, Scottish and Southern, Scottish Power and Npower – will have to overhaul their confusing and expensive tariffs this year to escape tougher action, it said.

One solution is a Competition Commission inquiry into the whole industry which could force a break-up of its dominant players, who have 99 per cent of the market. The other is imposing price controls for the first time since 2002 – potentially affecting all 22 million households in Britain. Ofgem said: "Parliament has given us the task of trying to create an effective market where competition is the downward pressure on prices. We think that's the way to go, although we haven't ruled out regulation, particularly for more vulnerable customers, if our reforms don't work."

Bills have doubled since 2005 to £1,250 a year, leaving 5.5 million households in fuel poverty, spending 10 per cent or more of their income on power. Rising global demand for energy and the end of cheap North Sea gas are responsible for most of the increases, but consumer groups also believe suppliers are keeping bills artificially high.

Yesterday one of the Big Six, the French-owned EDF, reported a near trebling of its annual profits to €3bn (£2.5bn), with profits from its British operations rising 8.5 per cent. It is currently the subject of two Ofgem investigations into poor customer service and mis-selling. Over the next three months, the Big Six – four of which are foreign-owned – are expected to announce total European profits of £15bn, up £2bn on last year.

The Independent's energy campaign is calling for a windfall tax on excessive energy profits and for the money to be used to help in the fight against fuel poverty by making homes more energy efficient.

Almost 3,000 winter deaths are caused every year by fuel poverty, according to one study, and Age UK estimated last month that two million elderly people were so cold they huddled in bed when not tired to keep bills down. The new Energy Secretary Ed Davey and his Labour counterpart Caroline Flint have already backed our campaign, underlining a tougher stance towards the energy giants.

Ofgem is currently consulting on forcing them to set uniform standard charges to allow consumers to compare raw costs, or unit prices, more easily. It is also intending to sweep away the hundreds of different tariffs operated by the companies into just two types – standard and innovative.

Ofgem's faith in an unfettered free market has been shaken by the failure of the Big Six to embrace its previous reforms of bills and tariffs. Although it says it is "encouraged" by recent attempts by some suppliers to simplify charges, it is closely monitoring their performance.

Unless all the companies agree to its latest reforms, expected to be announced in July, it will trigger a Competition Commission inquiry. If they do accept them, it will scrutinise their performance carefully. From March, it will issue weekly rather than monthly reports on suppliers' margins, currently £80-a-year per dual-fuel customer.

In an article published online at Independent.co.uk today, one of Ofgem's senior officials, Ian Marlee, says the regulator "will continue to force the pace of change by taking a tough stance on enforcement and by driving forward changes to increase the competitive pressure on all energy suppliers."

Pointing out that bills are expected to rise by up to 60 per cent by 2020 as suppliers invest £200bn in replacing clapped-out power stations, he adds: "Consumers are right to ask whether the market structure is right and whether re-regulation of prices is the answer."

Consumer groups expressed anger at EDF's rise in profits . Audrey Gallacher, director of energy at Consumer Focus, said: "EDF Energy's UK profits have risen despite lower energy use in the milder winter. This will leave many customers wondering whether energy prices can, and should, be cut further."

She added: "Consumers need to know big profit margins are not being made needlessly at their expense."

Which?'s executive director Richard Lloyd said: "When people see energy suppliers announcing increased profits despite a mild winter, they're bound to question whether they're paying a fair price. There's an unstoppable tide of public opinion demanding more affordable energy."

UK Energy, which represents the energy industry, refused to be drawn on the threat of price controls. A spokesman said: "Companies are looking very closely at all the reforms proposed and listening hard to what their customers are telling them about the choices and the service they expect.

PROMOTED VIDEO
Life and Style
food + drink
Life and Style
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
tech
News
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvSeries 5 opening episode attracts lowest ratings since drama began
Arts and Entertainment
Ben Affleck stars as prime suspect Nick Dunne in the film adaptation of Gone Girl
filmBen Affleck and Rosamund Pike excel in David Fincher's film, says Geoffrey Macnab
Life and Style
fashion
News
news
News
ebooksAn unforgettable anthology of contemporary reportage
News
people
Travel
Warner Bros released a mock-up of what the new Central Perk will look like
travel
Arts and Entertainment
Lena Dunham
booksLena Dunham's memoirs - written at the age of 28 - are honest to the point of making you squirm
News
i100
Arts and Entertainment
Jake Quickenden sings his heart out in his second audition
tvX Factor: How did the Jakes - and Charlie Martinez - fare?
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

COO / Chief Operating Officer

£80 - 100k + Bonus: Guru Careers: A COO / Chief Operating Officer is needed to...

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments