The government is to launch a review of the energy sector and green taxes in response to inflation-busting rises in gas and electricity bills.
Following Sir John Major’s call for a windfall tax on energy suppliers, David Cameron told the Commons there would be a “proper competition test” to establish whether the energy market could be made to work in the interests of consumers.
Speaking at prime minister’s questions, he also said he wanted to “get to grips” with green regulations which were driving up energy bills. Three energy companies have just announced rises of up to 10 per cent.
Mr Cameron said: “I can tell the house today that we will be having a proper competition test carried out over the next year to get to the bottom of whether this market can be made more competitive,” he said.
Challenged about Sir John’s comments by Labour leader Ed Miliband, the prime minister said: “I want more companies, I want better regulation, I want better deals for consumers. But yes, we also need to roll back the green charges that he put in place as energy secretary.”
Mr Miliband has proposed freezing energy bills, which led Mr Cameron to brand him a “conman”, earning a rebuke from Speaker John Bercow for unparliamentary language.
The prime minister said “an annual audit of competition” was needed, along with an attempt to “roll back the (green) costs that have been imposed on people’s energy bills”.
Read Krishnan Guru-Murthy's blog: Rolling back green policies
He said alternative energy suppliers, from the private, co-operative or charitable sectors, should come on board to challenge the so-called “big six”.
David Cameron has made it clear he wants a review of green levies on people's energy bills. But going green can actually save money ..... according to a report published in March by the Department of Energy and Climate Change.
The report says energy efficiency measures included in the government's green deal scheme, such as better insulation and boilers, would stop bills going up so fast in future.
It says: "The average impact of policies on household energy bills in 2020 is estimated to be an 11 per cent reduction (£166) on what they would have been in 2020 without policies. .. but household energy bills are estimated to be, on average, around 6 per cent higher (in real terms) than in 2013."
The chief executive of environmental charity WWF-UK, David Nussbaum, said: "It's worrying to hear the prime minister call for the 'rolling back' of green regulations. Doing so could be a false economy, and not save money in the long run. Acting now to insulate homes and help people be more energy-efficient is the best way to reduce their energy bills immediately."
A Downing Street spokesman told Channel 4 News Mr Cameron wanted to see a reduction in green levies on bills, which make up 9 per cent of total costs. But he said the prime minister was not referring to the green deal under which households can get a loan for energy efficiency measures and then get reductions in their future bills to offset the loan repayments.
Downing Street said that details of the competition review will be set out next week in the annual energy statement to the Commons by Energy Secretary Ed Davey.
An annual review of competition in the energy sector will be conducted by regulator Ofgem, the Office of Fair Trading and the new Competition and Markets Authority. The first review is expected to begin within weeks and report next year.
It will look at issues affecting competition and consumers, ranging from prices and profit levels to barriers to new entrants in the market, as well as how companies engage with customers.
“With regard to the charges that are part of people’s bills, we are of course looking across the board at what more government can do to help customers and consumers,” said the prime minister’s official spokesman.
He said that despite the review of green levies, the government was not giving up its claim to be “the greenest ever”. Details will be announced in Chancellor George Osborne’s autumn statement on 4 December.
Downing Street sources said that, if there was no policy change, green levies could rise from the current £112 to £194 – 14 per cent of the typical household bill – by 2020. Labour said that £67 of this £112 was accounted for by measures introduced by the coalition government.
Shadow energy secretary Caroline Flint said: “People are seeing the cost of heating their home rising by 10 per cent right now and all he offered was yet another review of a market that everyone knows is broken.
“And rather than standing up to the big energy companies he proposes letting them off the hook by scrapping the very same green levies that his own Government introduced.”