Page last updated at 15:41 GMT, Wednesday, 17 December 2008

Energy firms face price cut laws

Prices charged by all the major suppliers have risen in 2008

The government is ready to change the law to force energy companies to pass on falls in oil and gas prices, Commons leader Harriet Harman has told MPs.

Ms Harman made the comment as she was standing in for Gordon Brown at prime minister's questions.

The cost of wholesale gas is linked to the price of oil, which has slumped in recent weeks.

Some of the "big six" suppliers have already suggested prices could fall early in the new year.

Householders faced two price increases for gas and electricity bills during 2008, with the average dual fuel bill going up by more than 300 over the year.

The energy firms have come under increasing pressure from ministers, including Chancellor Alistair Darling, and head of regulator Ofgem Alistair Buchanan, to cut prices.

Law change

But Ms Harman's words are the starkest warning yet that the government will legislate if it is not satisfied with the energy giants' response.

She told MPs: "The energy companies must pass on the price cuts to consumers - both businesses and families. They must also treat all consumers fairly.

"And if they don't, it won't just be Ofgem and the Competition Commission they'll have to worry about. We will change the law to force them to do it."

She was responding to Labour MP Brian Donohoe, who said: "At a time when the price of a barrel of oil has sunk like a stone, why is it that the energy companies are charging the price they are for fuel?

"Surely it is time for more to be done by the government ... in bringing down the price.

"Will you give me an assurance to take back to my constituents that the government is doing all they can to bring about lower energy prices." Ms Harman said she "absolutely agreed" with the MP.

Some companies have already begun to reduce their prices.

Price cuts

British Gas announced in November that it was narrowing the price between pre-payment meter bills and other forms of payment - leading to a 22 average cut in the annual bill of a dual fuel pre-payment meter customer.

And the UK's second-biggest energy company, Scottish and Southern Energy, said it was "optimistic" that domestic prices could be cut early in 2009 if wholesale gas and electricity prices continued their downward trend.

E.On has also said it hoped that energy bills would come down next year.

It said it would cut the annual bills of some residential electricity customers who are not on mains gas. Customers from the East Midlands, East of England and North West, who buy just electricity from E.On, will see their annual bills reduced by 14.

Npower also said it was making similar changes. Its pre-payment meter customers now paid the same as those on with standard quarterly cash or cheque bills.

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