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Energy firms 'not playing straight'

The UK's gas and electricity suppliers have been accused of failing "to play it straight" with consumers as the energy watchdog unveiled a proposed shake-up of the industry.

Following a review of the retail market, Ofgem said for the first time it had evidence the "big six" firms had hiked bills in response to rising costs faster than they reduced them when expenses fell.

The regulator has threatened the major suppliers with a referral to the Competition Commission if they do not simplify prices and sell off between 10% and 20% of their electricity output to allow smaller firms to enter the market.

The watchdog hit out at the number of different tariffs available and called on firms to narrow the range of standard tariffs on offer.

Ofgem launched its review in November after it emerged that price hikes had seen profit margins soar by an average of 38% at major suppliers, which include British Gas, E.ON Energy, EDF Energy, Scottish Power, npower and Scottish & Southern Energy.

The watchdog's report was welcomed by consumer groups and the Department of Energy and Climate Change, while industry representatives also backed moves for more transparency in the market.

Ofgem chief executive Alistair Buchanan said: "Consumers must have confidence that energy companies are playing fair at a time when they are being asked to foot the £200 billion bill to pay for the investment Britain needs to ensure secure and sustainable energy supplies."

The review found competition was being "stifled" by complex tariffs, poor supplier behaviour and a lack of transparency.

The number of tariffs available has risen by 180 to more than 300 since 2008, leaving customers "bamboozled", Ofgem said.

Ofgem's reforms include reducing the number of tariffs suppliers offer to avoid confusion over price and improving transparency by appointing an independent accounting firm to ensure the suppliers' books are clear. The consultation period for the review closes on June 1.

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