Power companies have been forced on to the back foot after the Labour party claimed they were charging customers inflated prices for electricity.
An analysis of official figures, which claimed to show households had paid £50 more than the market rate a year over the past three years, also put the industry regulator on the defensive.
Ofgem initially said it could not comment on the claims because it had not seen the details, adding there was a lack of transparency in the market. It later said its analysis of the relationship between wholesale and retail prices “does not support this allegation”.
Peter Atherton, an analyst at broker Liberum Capital, described Ofgem’s reaction as “lamentable”. “They are not there to defend the industry but this is undermining investor confidence.”
Government officials on Thursday resisted being drawn into a debate with the opposition Labour party about energy market transparency. An official at the department of energy said Ofgem already had a review of competition in hand and would report back in March.
Energy prices look set to dominate the political agenda in the run-up to the 2015 general election. Labour is keen to press its advantage, after Ed Miliband last year promised a 20-month bill freeze if the party wins power.
However, Downing Street is determined the prime minister will not be bounced into action by his Labour rival again – last year Mr Cameron rushed through a rollback of green levies to cut £50 from consumer bills.
“Government never likes to be told somebody else is setting the agenda, Labour have been pushing that but I think there was a clear signal in the autumn statement that we are drawing a line under that,” said one government official.
The Labour party calculated its figures by comparing the price paid by the big energy groups – the weighted average cost of fuel – with the average market price a year ahead published by small supplier First Utility.
The figures are disputed by Energy UK, which represents the industry. It says they are not comparable because the overall wholesale cost encompasses more than just the market price.
Darren Braham, chief financial officer of First Utility, declined to comment specifically on Labour’s analysis but told the Financial Times: “Our data are just the wholesale costs of the electricity and gas, and exclude the costs of imbalance and network losses, which can add up to 10 per cent to the pure wholesale costs.”
Ofgem said it was already acting to improve transparency and competition in the market.
Reforms include obligations for the big six to publish the price they will pay for wholesale power for up to two years ahead.
The regulator is also carrying out a review of competition with the Office of Fair Trading and the Competition and Markets Authority.
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