At the same time the industry regular scrutiny of energy companies prices showed increases in household prices despite a wholesale fall in costs.

The net margin for a typical standard tariff dual fuel customer rose by £30 in February 2010 from November.

However, this is less than Ofgem forecast last quarter, because one major supplier, British Gas, cut its gas prices by an average of 7%.

The power regulator made the announcements yesterday (February 22) and has launched a consultation into energy market liquidity.

Previously, in its energy supply market probe, Ofgem identified that liquidity – the ability of smaller firms to purchase a variety of deals to help them manage risk – in wholesale electricity markets was poor.

And therefore a major obstacle preventing new suppliers entering the market.

Ideally, for the watchdog new market-led initiatives, like the recent N2EX and the existing APX exchanges will deliver this extra liquidity and meet the needs of new independent suppliers.

However, Ofgem’s senior partner for markets, Andrew Wright, said: “Ofgem believes the lack of liquidity is a major reason for the lack of a strong competitive pressure from independent suppliers.

“We have put forward proposals for consultation with the industry to ensure that, if the market-led initiatives fail to deliver, we have reforms that are ready to be implemented.”

Luke Walsh

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