The Prime Minister has announced that the Government will legislate to oblige energy suppliers to give their customers the lowest prices possible in a bid to drive down prices, reports Reuters.
The announcement comes after several of the main energy companies announced that they would raise prices in the next month or so.
Scottish Power announced this week that prices will rise up to 8.7%, whilst British Gas will raise their prices by 6% and npower 8.8%. SSE announced a 9% price hike in August, which came into effect this week.
The only firms not to raise their prices are EDF and E.ON, although the latter has a price freeze in place till January and may then put their prices up in the New Year.
Time to legislate
The Prime Minister announced the new laws in his Prime Minister's Questions yesterday, telling Parliament that energy companies will be forced to give customers the lowest tariffs. The new laws will be included in part of an Energy Bill, which is due to be presented to Parliament before the end of 2012.
"We will talk to companies and others about the details, and precisely how we put this into law, but the objective is very clear," a spokesman for the Prime Minister said.
However, consumer groups fear that any legislation might kill competition and actually disadvantage consumers.
"This has to be a mistake - the unintended consequences would be to kill competition," said Anne Robinson, who works for price comparison group uSwitch.
Why is the market failing?
Successive governments have tried and in many ways failed to use competition between energy companies to create more favourable market conditions for consumers.
Examples of policies include that announced by Nick Clegg in April, forcing energy companies to contact consumers once a year to explain their cheapest deals.
Consumer Groups are also encouraging consumers to be aware of their energy rights, which they claim many people are unaware of.
Adam Scorer is director of policy at Consumer Focus.
"Households across the country are worried about their energy bills. But the simple fact is many people don't know what their rights are or where to find help, and they could be losing out as a result," he said.
Consumers are largely unaware that they have a wide range of rights when dealing with their energy suppliers. For example, a consumer is entitled to a two-hour slot to have a meter reading taken and can claim £20 compensation if the energy supplier misses that slot for a gas meter and £22 for an electricity meter.
Consumers can also claim compensation for power cuts of up to £54 for an outage of 18 hours or more, or for 4 or more power cuts lasting 3 hours each. Consumers can also claim up to £250 if they are forced to switch to another supplier.
Consumer groups are now rallying together to help consumers drive down the cost of their energy bills, publishing a guide to energy rights called 'Staying Connected'.
Which? director Richard Lloyd wrote to Mr Cameron on Wednesday to request a review of the energy market in the UK, saying that it was a failing market.
"This is a big moment for consumers," he said.