Government energy plans are a "mistake" say consumer groups

The Prime Minister, David Cameron, has intervened in the energy price rise row and said that he will force energy companies to offer consumers the cheapest deal.

However, consumer groups have criticised his plans, saying they are ill-thought out and could hamper competition.

This morning in parliament, Energy Minister John Hayes said that he will bring forward legislation to help energy consumers be able to get the best deal.

He said the government will increase competition in the wholesale market in a matter of weeks rather than months.

However, responding, Shadow Energy Minister Caroline Flint accused the Prime Minister of throwing energy policy into confusion and making up the government’s energy policy as he went along.

It has emerged that the Prime Minister and his Liberal Democrat Energy Minister, Ed Davey have announced directly opposite policies within 24 hours.

The Prime Minister unveiled his plans after the latest round of energy price rises by four of the “big six” energy firms, British Gas, npower, SSE and Scottish Power, have taken the average annual dual fuel energy cost to more than £1,300.

The government’s initiative is an attempt to move the majority of consumers from their suppliers’ standard tariff to a cheaper deal.

Consumers can do this themselves by comparing and switching but have shown a reluctance to do this. More than half of all UK households have never switched energy suppliers.

Yesterday in the House of Commons, Mr Cameron said: “I can announce that we will be legislating so that energy companies have to give the lowest tariff to their customers.”

This week is the first anniversary since last year’s energy summit involving the regulator, Ofgem, energy firms, government ministers and consumer groups.

The government has been criticised by Which? for not doing enough to force energy firms to keep bills low and help consumers. Which? has called for an independent review into energy prices.

In a letter to the Prime Minister, Which? Executive Director Richard Lloyd said: "It's time to face facts: the energy market is broken. The sector is dominated by a handful of big and powerful players who are seemingly unaffected by the normal competitive pressure of price and customer service."

The Prime Minister’s official spokesman admitted that energy companies had failed to reform in the past 12 months and said: "We have asked energy companies to take action themselves and make clear what the lowest available deals are.

“The point is, in practice this market is not operating for everyone. A small minority of people are actually switching deals, therefore we need to push some of this responsibility on to the energy companies."

However, consumer groups believe that although the government’s intentions may be good the policy is a “mistake”.

Ann Robinson, director at uSwitch said: "This has to be a mistake - the unintended consequences would be to kill competition. Consumers will be left with Hobson's choice - there will be no spur, no choice,  no innovation and no reason for consumers to engage any more.

"The only glimmer of hope would be that smaller suppliers will be able to offer cheaper prices than the big six and therefore competition is able to continue in that arena."

Richard Lloyd reacted to the statement from Prime Minister by saying: "Legislating so energy companies have to give the lowest tariff to their customers is a big statement from the prime minister and acknowledges that competition in the energy retail market has failed.

Citizens Advice is launching the Big Energy Saving Week on 22 October to target millions of families across the UK giving advice on keeping energy bills down.