Energy suppliers risk “undermining public confidence” in the market by failing to respond to falling wholesale prices, the regulator has said.
Ofgem said the “big six” gas and electricity companies should explain to customers why falling wholesale prices have not been passed on to household bills.
Under one measure, wholesale prices are at their lowest level for four years. Wholesale costs make up nearly half of a household energy bill.
The Labour Party has promised a price freeze until the start of 2017 if it wins the general election, arguably adding a political dimension to any pricing decisions.
“In a properly competitive market, there is no reason why cost reductions should not be passed on as quickly as cost increases. If there is evidence that this is not happening, that clearly suggests that competition is not properly functioning and that some kind of regulatory intervention is needed,” said Caroline Flint, shadow energy minister.