Miliband promises crackdown on soaring utility bills

The Energy Secretary, Ed Miliband, warns suppliers today to cut gas and electricity bills amid signs the Government is losing patience with the £27bn-a-year industry.

In an interview with The Independent, Mr Miliband called for prices to be lowered within months if wholesale energy prices continued their steep decline. He pointed out that the regulator Ofgem has forecast an 8 per cent fall in wholesale gas this winter, or £55 per customer.

Promising to usher in a new era of "tougher regulation", he disclosed that new legislation would hand Ofgem stronger powers to protect the country's 26 million electricity and 22 million gas customers. He also said poor families would be offered "energy mortgages" to fund insulation and renewable energy, a move which could create a market worth billions of pounds annually.

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"I'm very clear that we need tougher regulation on behalf of the consumer," said Mr Miliband, who is drawing up Labour's general election manifesto. "We can't rely on a markets-only policy to protect the consumer any more."

As part of of its campaign against The Great Energy Rip-off, The Independent is calling for a 10 per cent cut in energy prices and powers to revoke the licences of suppliers that fail to pass on wholesale reductions. Prices for wholesale gas and electricity have halved during the past year but annual average bills, which spiked by 42 per cent last year, have fallen by just 4 per cent this year, to £1,140.

Although suppliers have bought more expensive long-term energy contracts, independent analysts estimate prices are between £100 and £120 too high.

Mr Miliband said: "I've talked in some detail to the regulator about this. Their view, in terms of looking in the round at all the costs the companies face, is that over the next six months they expect wholesale prices to fall, and I would expect that to be passed on to the consumer. So there should be price cuts for consumers, if wholesale prices fall as Ofgem expects them to."

The suppliers' representative, the Energy Retail Association (ERA) gave no indication of imminent reductions. Instead it re-iterated that present pricing was due to long-term contracts. "This means that there is always a time lag between when prices change on the wholesale market and when they change on domestic bills," the ERA said.

The watchdog, Consumer Focus, welcomed Mr Miliband's comments. "The Big Six energy companies have created a fog of confusion to justify high prices, but for consumers the story is quite simple," its energy expert, Robert Hammond, said. "The suppliers get away with making huge profits while their customers pay through the nose."

Mr Miliband, who took charge of the newly formed Department of Energy and Climate Change last year, indicated that Labour was now inclined to take a more "balanced" view of markets, rather than believing they always delivered for the public.

In particular, he referred to the Big Six energy firms' overcharging of pre-payment customers, who for years paid more than other customers, even taking account the extra expense of providing meters. Ofgem ended the rip-off last October, after finding £500m of overcharging of pre-payment and electricity-only rural consumers.

"We have the lowest median price for gas in Europe and we have below average prices for electricity," said Mr Miliband. "Now that doesn't make me complacent, but my view is that there's essentially two markets. There are the people who switch in a keen way and get better deals. And then there are the people who don't switch and my concern, to be totally honest, is that they have been left behind and that's why we're proposing these legislative changes."

In a new Energy Bill to be announced in the Queen's Speech next month, Ofgem will be given power to intervene more closely in the market, particularly in the way suppliers deal with generators amid signs of what Mr Miliband termed "market abuses".

But he rejected The Independent's idea of removing the licences of recalcitrant suppliers, saying Ofgem could refer anti-competitive firms to the Competition Commission. "The best way of getting a better deal for consumers is to have tough regulation and I say we need tougher regulation," he said.

The Government is trialling a new "Pay As You Save" scheme that provides the upfront costs of energy efficiency by spreading repayments over a period of time. The loans will be linked to the property rather than the occupier, to allay the concerns of those thinking of moving. Four hundred homes will be in a two-year trial, starting this month.