MPs want inquiry into the great energy “swindle”

Amid growing anger over energy prices, 51 MPs have signed a Commons motion calling for a competition inquiry into whether British Gas, EDF and other suppliers are unfairly failing to pass on steep falls in wholesale costs.

The shadow Energy and Climate Change Secretary, Greg Clark, and the Liberal Democrat energy spokesman, Simon Hughes, have signed the motion, to be tabled by the Labour backbencher John Grogan.

It calls for an investigation by the Competition Commission into the pricing behaviour of the "big six" suppliers, which could lead to price caps being imposed on the £27 billion-a-year household energy business. Hundreds more MPs could back the move because, in addition to being official Tory and Liberal Democrat policy, fuel bills are above average in Labour's heartlands in the north of England and Scotland.

Anger is growing over energy prices because the "big six" – British Gas, EDF, E.ON, Scottish Power and Scottish and Southern – have cut bills by only 4 per cent this year to £1,140, despite wholesale costs, which make up 60 per cent of the bill, halving in the past year. Minnows such as First:Utility and OVO Energy have recently introduced bills as low as £921, £440 cheaper than Scottish Power's tariff of £1,361.

The "Great Energy Rip-Off" campaign, launched by The Independent two weeks ago, is calling for price reductions of 10 per cent, the extent of overcharging estimated by Britain's biggest energy analyst, McKinnon & Clarke.

Ofgem last year cleared the "big six" of collusion to fix prices, but Mr. Grogan, who believes his early-day motion will attract significant support, suggested the problem lay not in an outright cartel but in their dominance.

As well as supplying 99 per cent of households, the "big six" own a network of power stations, making them strong examples of "vertically-integrated" businesses.

Mr. Grogan, MP for Selby, said: "I do not think that the 'big six' energy companies meet together and fix prices, but their sheer dominance in the market and the vertical integration of power generation and retail distribution have led to a disconnect between wholesale and retail prices."

For the Tories, Mr. Clark complained the relationship between wholesale prices and the bills families received was opaque. "Even the Government's own watchdog, Consumer Focus, has said that every household is paying £96 a year too much. The Government should cut through the confusion and end it once and for all by a swift, forensic reference to the Competition Commission."

The "big six" suppliers say they cannot lower prices because they are locked into expensive, long-term contracts agreed when prices spiked last year and have been hit by rising environmental costs and bad debt. In September, they rebuffed Ofgem's demand for them to outline a timetable for cuts in prices to the UK's 26 million electricity and 22 million gas customers.

Some experts believe that they will try to hold off announcing cuts until January, to ensure families pay high rates during peak demand in the winter.

However they are under rising pressure because of the price cuts by new rivals and political concern about worsening fuel poverty. According to recently released figures, the number of households paying 10 per cent or more of their income on fuel bills had risen to 6.6 million this year, or one in four families.

The Energy Secretary, Ed Miliband effectively admitted that previous energy regulation had been too weak and set out plans for tougher oversight, particularly for generation amid some evidence of “market abuse” by the big suppliers.

An inquiry by the Competition Commission would look into whether competition in the market was being “prevented, distorted or restricted” and could have widespread consequences. It would have the power to recommend the break-up of the £27 billion-a-year industry.

During the last two years, its “market remedies” have led to the end of BAA’s dominance of airports in the South-east, the introduction of a ‘competition test’ for new hypermarkets, and reforms to the mis-selling of payment protection insurance.

Mr Grogan, MP for Selby, said: “The only argument against a Competition Commission review that Ed Miliband has ever given me is that it would create a period of uncertainty.

“Now that both opposition parties and a large slice of Labour backbenchers support a Competition Commission referral that uncertainty exists anyway in advance of a General Election. The way to end that uncertainty is to let the Competition Commission get on with the job of investigating the ‘Big Six’ energy companies.”

Responding to the motion, Ofgem “shared the anxiety” felt by millions of households about high energy bills this winter.

It said: “Given consumer expectations arising from widely reported reductions in wholesale energy prices suppliers owe their customers an explanation of their pricing.”