Ofgem launches energy probe

Energy regulator Ofgem has launched an investigation into the gas and electricity markets for households and small businesses, in response to mounting customer concern over rising energy prices.

This week British Gas posted record profits of £571 million, just a month after raising prices by 15%. Yet the country's biggest domestic energy supplier said that higher bills would be inevitable for the foreseeable future because of wholesale costs.

"We are concerned about the increased volatility of wholesale prices and we want to investigate how European and other global energy market developments are affecting energy bills in Britain," said Ofgem chief executive Alistair Buchanan.

A spokesperson for Ofgem told More Than Business News that the purpose of the investigation was to restore confidence among customers. "The results of this inquiry will show whether the market is working effectively. If it isn't then we will use our powers to address any problems that come out of it," she said.

Mr Buchanan stressed that customers should continue to shop around for the best deals "as there are still big savings to be made by changing your price plan, your supplier and the way you pay".

The Times reports that more than 70 MPs have signed an early day motion claiming that the UK market is unhealthily dominated by six suppliers.

The outcry follows November's research by gas and electricity watchdog Energywatch, which said that small businesses were getting a "raw deal" from suppliers.

Initial findings from the Ofgem probe will be published before the end of September – ahead of next winter.