In the pre-Budget report yesterday, Alistair Darling announced that energy companies could be forced to pass on price cuts to their customers.
The Chancellor told how Ofgem, the energy regulator, will publish quarterly reports that would show whether or not the falls in wholesale energy prices were being passed on to the consumer, and that if the reports showed they weren't, gas and electricity providers
could be forced by law to pass on the cuts.
In 2002, regulators removed retail price controls and since then, gas and electricity
bills have risen by 60 per cent and by more than 30 per cent in the past year alone.
Customers on dual fuel tariffs are paying around £1,300 compared to just over £900 a year ago and for people on prepay meters, the costs have spiraled even further despite the fact that wholesale energy prices have actually dropped.
"I know there is widespread concern that the fall in the price of wholesale energy has not been reflected quickly enough in reduced household bills," said the Chancellor yesterday.
"I can tell the House that Ofgem is to monitor price changes and publish quarterly reports detailing the link between wholesale and retail prices.
"Alongside this, if sufficient progress is not made in the next few months in closing unfair gaps in pricing….the Government will use statutory powers to end unjustifiable pricing differentials," he said.
James Caldwell, director of Fairinvestment.co.uk says it is about time some real action was taken, calling the proposals "a big step in the right direction"
"Energy bills increased by nearly 30 per cent in the 12 months up to September 2008, and Gordon Brown's previous threats to energy companies to cut their prices seemed to have fallen on deaf ears. In the pre-Budget report, Alistair Darling has made a big step in the right direction."
Mr Caldwell said that Ofgem's quarterly reports mean that "energy companies will no longer be able to hide their profits which will in turn increase competition once more in the energy market.
"Consumers will be able to shop around, compare energy prices
and pick the one that really does give them the best deal."
The chancellor also announced a 70 per cent increase in the amount being spent on improving the energy efficiency of homes.
Mr Caldwell said this was a "start" but warned "this still falls far short of where we should be – there are around three million households in 'fuel poverty' and this will help just 60,000."
But, he said, "it will help reduce carbon emissions and could save thousands of families £100s on their bills which could really make a difference to their tight household budgets."
© Fair Investment