‘Big Six’ energy prices should be investigated, says Ed Davey

Energy Secretary Ed Davey is calling for an investigation into the profit margins of energy companies (Getty Images)

Profits made by the “Big Six” gas and electricity energy companies are far higher than previously thought and warrant investigation, according to the Energy Secretary.

Ed Davey has written to competition regulators asking them to investigate the margins as part of an ongoing review, according to the BBC.

He singles out British Gas for having of the industry's highest margins and a 41 per cent stake of the market.

In a statement, the company said its figures had already been fully disclosed to the Office of Fair Trading, Ofgem and the Competition & Markets Authority and had been “in the public domain for a number of weeks."

Mr Davey said the Ofgem and the CMA should investigate all options "including a break-up of any companies found to have monopoly power to the detriment of the consumer".

Energy prices have been high up the political agenda since Labour leader Ed Miliband pledged to freeze energy prices for 20 months if he was elected.

It follows a series of above-inflation price hikes by the firms that, according to Mr Davey’s figures, have set profit levels four times that above the big supermarket chains.

According to the BBC, British Gas has charged the highest prices over the last three years. Mr Davey's letter questions whether this was made possible because of its “strong monopoly position”.

It added: "Analysis of the profit margins of the energy companies shows that the average profit margin for gas is around three times that of electricity.”

It was sent with accompanying data that said Centrica, which owns British Gas, recorded 11.2 per cent profit margins in 2012. Rival EDF made a 4.1 per cent loss on gas in 2012.

The analysis compares this with the profit margins of supermarkets which typically range from 3.5 per cent to 5 per cent.