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PM in energy competition test vow
David Cameron said he wants to 'get to grips' with 'green' regulations which were driving up energy bills
The Government is to launch a "proper competition test" to establish whether the energy market can be made more competitive, David Cameron has said.
Announcing the move at Prime Minister's Questions, Mr Cameron also signalled he wanted to "get to grips" with "green" regulations which were driving up energy bills.
"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.
Mr Cameron's intervention came after former prime minister Sir John Major yesterday called on the Government to impose a windfall tax on the profits of the energy companies.
Challenged by Sir John's remarks by Labour leader Ed Miliband, Mr Cameron 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."
His comments threatened to put him at odds with his Liberal Democrat coalition partners who have made clear they are firmly opposed to any move to get rid of existing green tariffs.
Amid heated exchanges, Mr Cameron lashed out at the Labour leader, telling him: "Sir John Major is a good man, you are acting like a conman."
He said: "He left us a market with just six players, we have already seen seven new energy companies come into that market.
"So we need an annual audit of competition to make this market more competitive, something he never did when in office.
"And we need to roll back the costs that have been imposed on people's energy bills, part of which he was responsible for."
The Prime Minister was later rebuked by Speaker John Bercow for calling Mr Miliband a "conman".
Downing Street yesterday appeared to pour cold water on Sir John's call for a windfall tax, saying merely that it was an "interesting" suggestion.
Mr Cameron said the former premier had been "absolutely right" however to say that energy bills had reached a "completely unacceptable level" and that action was needed.
Mr Miliband said Sir John had exposed the Prime Minister's unwillingness to stand up to the energy companies.
"Many people face the choice this winter between heating and eating. These are the ordinary people of this country who this Prime Minister will never meet and whose lives he will never understand," he said.
Earlier, another Tory grandee urged Mr Cameron to get tough with the big energy companies if it was shown they were using their monopoly powers to make excess profits.
Former social security secretary Peter Lilley said the Government should be prepared to hand greater powers to the industry regulator, Ofgem, if an inquiry by the Commons Energy and Climate Change Committee found the companies were abusing their domination of the market.
"We have got to have a proper system that makes sure that the energy companies do not raise prices more than is justified by investment and rising costs," he told the BBC Radio 4 Today programme.
While he rejected the idea of a windfall tax - warning it would simply add to the cost of energy - he said both Sir John and Mr Miliband, who is proposing a temporary price freeze, were right to try to address the issue.
"They are both sensibly trying to propose something that will help people with their energy bills, because that's what matters most to people the lower down the income tree you go and the further north in the country you go," he said.
Downing Street said that details of the competition review will be set out next week in the annual energy statement to the House of 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, said the Prime Minister's official spokesman.
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 spokesman.
The spokesman declined to give any detail of sanctions which energy companies might face as a result, but said: "It would be wrong at this stage to rule anything out in terms of how we get more competition into the market."
The spokesman said the review was agreed by both Conservative and Liberal Democrat sides of the coalition and insisted that the Government was not giving up its claim to be "the greenest ever".
The Prime Minister's ambition to "roll back" green levies has also been discussed with Liberal Democrats over recent weeks, and details will be released in Chancellor George Osborne's Autumn Statement on December 4.
Downing Street sources said that, if there was no policy change, green levies could rise from the current £112 to £194 - or 14% of the typical household bill - by 2020. Mr Cameron wants action to reduce the impact of the levies, the source said.
Labour said that £67 of the £112 levies were accounted for by measures introduced by the coalition.
A Labour source said: "The Prime Minister is clearly in a panic over energy prices.
"He is refusing to take real action to tackle overcharging now. He wants to wait another year when bills are going up 10% as we speak.
"The Labour Party has a comprehensive plan to freeze prices and reset the market. David Cameron's response is panicked and totally inadequate."
Conservative MP and keen environmentalist Zac Goldsmith branded the party leaders "muppets" over energy.
The Richmond MP said on Twitter: " In 2010, leaders fought to prove they were the greenest. Three years on, they're desperately blaming their own policies on the other. Muppets."
Labour said that Ofgem had already carried out a Retail Market Review of the energy sector, taking in issues like price tariffs and companies' behaviour towards consumers, which reported as recently as June this year.
A Labour source said: "This is going to be another review by a failed regulator. The last one achieved absolutely nothing. Why should this one?"
Shadow energy secretary Caroline Flint said: " Today's PMQs showed an out of touch David Cameron, panicking over his failure to address soaring energy bills but still standing shoulder to shoulder with the big energy companies.
"People are seeing the cost of heating their home rising by 10% 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."
Mr Davey said earlier this month that it would be "silly" to cut green levies which help low-income households install energy efficiency measures.
Asked about calls for cuts in green taxes, the Energy Secretary told BBC1's Andrew Marr Show on October 13: ''Most of them are actually social policies to help the fuel-poor manage their bills. I don't think we want to get rid of those.
''Moreover, we need to help people who aren't necessarily fuel-poor but want to do energy efficiency measures to reduce their bills. It would be silly to get rid of that aspect. If you actually look at the part of the so-called green taxes which is funding renewable energy/low carbon energies it's only 4% of the bill.''