By William James and Sarah Young
LONDON (Reuters) - The bosses of Britain's six major energy suppliers will be questioned by MPs on Tuesday over allegations they have abused their power by hiking electricity and gas prices, in a dispute that could affect the next general election.
Soaring energy bills have jumped to the top of the political agenda in Britain since opposition Labour leader Ed Miliband promised to freeze energy bills for 20 months if he wins power in 2015, a proposal the government says is an empty gimmick.
The row has fanned a wider cost-of-living debate at a time when price rises on everything from utility bills to train tickets have outpaced stagnant wages. Britons believe energy prices are the biggest threat to the UK economy, polls show.
Parliament's cross-party energy and climate change committee said it would seek explanations from company executives after four of Britain's six biggest energy suppliers lifted charges for heating homes in the coming winter by more than three times the rate of inflation.
"We will want to see whether the companies can justify their increases in terms of costs and investment or whether it's prima facie evidence of monopoly power," said Peter Lilley, a Conservative member of parliament on the committee.
Senior bosses from EDF Energy, Centrica, SSE, RWE npower, E.ON and Iberdrola's Scottish Power will appear over the course of two sessions beginning at 1430 GMT on Tuesday.
Unlike most of Europe, where one or two often state-owned companies dominate power markets and where regulated tariffs were the norm in 17 out of 27 EU countries in 2012, the UK market has six major players, which freely set prices.
But competition has not held back prices as much as regulators had hoped. Energy prices in Britain have already risen 24 percent in the past four years, according to regulator Ofgem, although European data shows the energy prices British households pay are lower than the average in the rest of Europe.
Labour's Miliband accuses the firms of overcharging and wants them to foot the estimated 4.5 billion pound ($7.3 billion) cost of a price freeze while a future Labour government reforms the energy market, which he says doesn't work properly.
Prime Minister David Cameron has called Miliband's price freeze plans an unworkable "con" and ministers have warned the Labour proposal, if implemented, could lead to power outages and a collapse in investment in the sector.
The six companies, which control 99 percent of the retail energy market, have said a price freeze would hit their profits and could result in cuts to investment, jobs and the dividends they pay out to people's pension savings.
PRICE POLITICS
Though the British economy is reviving, Labour, which is just ahead in most opinion polls, says many Britons are faced with a choice between "eating and heating", and it accuses Cameron's Conservatives of being out of touch.
Under pressure to regain the initiative in the energy debate, Cameron announced his own plan to fight rising bills last week saying he would cut the green taxes partly responsible for surging prices and try to boost competition.
Eurostat data for the second half of 2012 show electricity prices for UK households were 9 percent lower than the European average and 33 percent lower than in Germany, while UK consumers paid 19 percent less for gas versus the European average and had the lowest charges of France, Germany, Italy and Spain.
Britain's "big six" energy firms have blamed price rises on increased wholesale energy costs, the cost of using the national grid and levies attached to government programmes.
According to Ofgem, 46 percent of consumer bills come from wholesale costs, with 23 percent arising from network costs and environmental and social costs accounting for 8 percent.
The cost to companies of complying with a number of government policies, including for instance the Energy Company Obligation which helps improve the energy efficiency of homes, has risen ten-fold over the last ten years, according to Ofgem.
The parliamentary committee has called in energy executives before in the past two years - most recently in April - to explore prices, profits and competition in their sector.
Labour lawmaker Alan Whitehead told Reuters the panel had been driven to convene by the stir over Miliband's pledge to freeze prices and other proposed interventions, including ex-Conservative prime minister John Major's call for a windfall tax on profits, and Cameron's plan to trim green taxes.
Ofgem could be asked to investigate competition in the sector should the panel find that firms have the power to raise prices by more than the increases in their costs, said Lilley.
"I hope it won't just be a 'bash the big six' session...," Whitehead said. "What I hope will be more constructive is to try to delve a little further into exactly what the factors behind the price rises really mean."
($1 = 0.6199 British pounds)
(Additional reporting by Karolin Schaps, Geert De Clercq; Editing by Mark Heinrich, Guy Faulconbridge and Mark Potter)
- Politics & Government
- Budget, Tax & Economy
- David Cameron
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