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Energy bill reform plans criticised

The Government has tried to take the heat out of the furore over soaring energy bills by unveiling a package of reforms, but critics said it resembled "rearranging deckchairs on the Titanic."

Energy Secretary Ed Davey warned of the prospect of criminal penalties for energy companies found to have rigged the markets as he said the industry needed to change to put consumers "in control."

He announced a new probe into firms' accounts, increasing penalties for market manipulation, and moves to make switching supplier simpler and quicker - moving from the current several weeks to just 24 hours.

The move followed continuing controversy over rising bills after four of the Big Six energy firms said charges would rise by an average of over 9%.

The blazing row between the Government and Labour over how to tackle energy costs continued to flare, with the Opposition pressing ahead with its pledge to freeze bills if it wins the next general election.

Mr Davey revealed that his department will consult on introducing criminal sanctions for anyone manipulating the energy markets.

He said the reforms will make it easier for consumers to switch and get the best deal, forcing energy companies to compete more actively for their custom.

The minister announced plans to make switching simpler and quicker, and a new probe into energy firms' accounts, to make them more transparent on profits and prices, as well as increasing penalties for market manipulation and regularly checking that the market is working.

He said: "The energy industry needs to change to put consumers in control. That means making it easy for people to change supplier to save money, it means regular market assessments to check their behaviour, and it means tougher penalties for market manipulation and putting an end to opaque finances.

"We want to push energy companies to make switching quicker and easier - because consumer action can force suppliers to change their ways. Bills are being redesigned through Ofgem's retail market reforms to give people the information they need to make switching easy - and we are taking direct action through the Big Energy Saving Network to bring first hand help to those vulnerable people who find switching difficult.

"Energy companies need to know that any wrongdoing will be uncovered and dealt with. That's why the regulators are going to carry out annual competition reviews, to make sure the energy market is operating properly. We are going to consult on increasing the sanctions for manipulation of the energy markets, so that they carry criminal penalties for the first time."

Friends of the Earth energy campaigner Sophie Neuburg said: "Ed Davey is right, bills are soaring thanks to rising gas prices - but promoting easier switching is like rearranging the deckchairs on the Titanic.

"The real solutions - massive investment in energy efficiency and a rapid switch to renewables - are conspicuous by their absence from the minister's plans."

Caroline Flint, shadow energy and climate change secretary, said: "It's another day, another policy that will do nothing to help people with their bills this winter. Hard-pressed energy customers struggling with the cost of living need action now, not endless reviews and consultations from an out-of-touch Government that refuses to stand up to the energy companies.

"What we need now is a price freeze because this is the only way we can deal with the energy companies overcharging."

TUC general secretary Frances O'Grady said: "Households are spending almost twice as much of their income on gas and electricity as they did a decade ago. This is what a living standards crisis looks like.

"But these proposals will do little to help, and look like the result of a desperate search for something to say rather than action to help household budgets."

Mr Davey told the Commons that energy companies should be more open about how they treat credit balances in consumers' accounts, making every effort to return money to customers who close accounts, he said.

Where that is not possible, energy firms should ring-fence that money to help the most vulnerable customers.

Mr Davey also announced that his department will work with the Post Office to signpost elderly and vulnerable people to the 500 volunteers being trained by the Big Energy Saving Network to help people find ways to cut their bills.

Ofgem will carry out an annual market assessment, working with the Office of Fair Trading and the new Competition and Market Authority to monitor the behaviour of market participants and ensure the market is working for residential and small business consumers and that all suppliers can compete fairly, with the first assessment completed by next spring.

The minister added that firms needed to be more transparent about how they reported their finances.

Ofgem will carry out a detailed assessment of energy suppliers' financial reporting practices and set out any steps to improve transparency so that consumers can see where their money is going.

This assessment will also report in Spring 2014.

Mr Davey said: "This is a critical time for our energy future as we deal with years of neglect and under-investment. The choices we are making now will affect the lives of every person in this country for decades to come.

"We've done what's necessary to make sure the lights stay on in the short term, while the record £35 billion investment we've attracted since 2010 will make sure that old, dirty power stations are replaced with cleaner, more efficient and more home-grown alternatives - ensuring energy security and more stable bills in the next 50 years."

Smaller energy companies have accused the Big Six of ripping off bill-payers, particularly those who remain loyal to one firm.

Ed Miliband, who has pledged a 20-month energy bill freeze if Labour wins the 2015 general election, has dismissed the review.

The Prime Minister has vowed to look at scaling back the environmental subsidies which under-fire energy firms blame in part for fast-rising bills for customers.

Which? executive director Richard Lloyd said: "There will be no great applause from the millions of consumers worrying about rising energy costs for the Government committing to make the regulators simply do their job."

Green MP Caroline Lucas s aid: "Being told to switch isn't much use when the odds are totally rigged in favour of a handful of big companies."

Paul Massara, chief executive of RWE npower, one of the Big Six energy firms, tweeted: "Lo ts of wild talk about cartels but no evidence and the facts don't support. Where is the evidence ???? Put up or shut up."

Mike O'Connor, chief executive of Consumer Futures, said: " We welcome the move for faster and smoother switching. Energy switching is slow, frustrating and turns people away from engaging with the market.

"But an announcement on a new competition audit needed to show clearer purpose and drive to win the confidence of consumers."

Ian Peters, managing director of residential energy at British Gas, said: "Rebuilding trust in Britain's energy market is a top priority, which is why we strongly support the proposals outlined by the Secretary of State today.

"We welcome the new annual review of competition for the energy sector, and we share the ambition for 24-hour switching, which will encourage more customers to engage with Britain's competitive energy market.

"British Gas is already working with others to make switching easier and faster, and we look forward to talking with the Secretary of State about this."

Ofgem chief executive Andrew Wright said: "It has never been easier to choose a better energy deal as Ofgem's reforms deliver a simpler, clearer and fairer market for consumers. Suppliers are cutting down the number of tariffs and their complexity ahead of our reforms, which limit them to four simple tariffs per fuel.

"Rules to ensure suppliers treat you fairly are already in place and further reforms are in hand to give clearer information, including putting your suppliers' cheapest deal on your bill.

"In addition to this radical shake-up of the energy market, Ofgem will be leading an annual review on the health of the market with the OFT and CMA. We are also continuing to look at new ways to build on our transparency reforms to ensure the energy market is as open as possible."

EDF Energy chief executive Vincent de Rivaz said: "We welcome the announcement of an annual competition assessment. It will be a helpful step to restore public trust in the industry.

"I've been calling for a competition authority to intervene for some time. To restore public trust, we must demonstrate that we are acting fairly. To do this, transparency is vital. We have nothing to hide."

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