Energy regulator Ofgem will be given powers to order suppliers to cut their prices by the end of the year and Labour will freeze prices until 2017 if it wins the general election in May, Ed Miliband is promising.
The Labour leader has indicated that one of his first acts in Government would be to push through a bill requiring Ofgem to conduct a review of energy prices by autumn, and if it finds they're too high, it will be given the power to tell it to reduce prices.
Labour says the measure is necessary as the big six energy companies – British Gas, EDF, Eon, Npower, SSE and Scottish Power – have failed to pass on falls in wholesale energy prices to consumers.
Over the last year, wholesale energy prices have fallen by an average of 20%, but the big six suppliers have reduced gas bills only by a meagre 1% – 5%. See MoneySavingExpert.com's Cheap Energy Club to see if you can switch and save.
Labour has also reinforced its pledge to maintain an energy price freeze until 2017 – so that prices could only fall and not rise.
Miliband originally promised a 20-month price freeze in his speech to the Labour Party conference in 2013 at a time of rising prices, although since then prices have started to come down as wholesale prices have tumbled (see the We'll freeze energy prices, Ed Miliband tells Labour conference MSE News story).
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Miliband, who is due to unveil the party's general election pledge card in a speech in Birmingham tomorrow, will say the plan shows he is prepared to stand up to the energy companies.
He is expected to say: "The costs of energy are tumbling down, not because of anything the Government or the big six energy firms have done, but because of global changes in oil and gas supply.
"The cost of energy to the big six firms fell by 20%, but the sky-high prices that families pay have only fallen by a fraction of that. Gas bills have declined by between 1% and 5%. Electricity bills haven't fallen at all.
"What better evidence do we need of the chronic over-charging, the broken market and the rip-offs being faced by millions of families and businesses across Britain?
"We will pass a law to ensure falling costs are passed on to the consumer this winter; a law giving the regulator a legal duty to ensure fair prices this winter; a law giving the regulator the power to cut prices and keep homes warmer this winter."
'Price freeze is main barrier to bills falling further'
However the Conservatives say Labour's energy policy is in chaos and it is Miliband's pledge to freeze prices that is the main barrier to further price cuts. Energy Minister Matthew Hancock dismissed Miliband's plan, saying that if Labour had stuck by its original announcement of a price freeze, charges for consumers would be even higher.
"This is now the sixth version of a chaotic Labour energy policy that would have put up families' bills by £100 and could do the same again – their record at setting prices has been a disaster," he says.
"This incompetence is exactly why Ed Miliband isn't up to the job. With the cheapest tariff now more than £100 less than when Ed Miliband was calling for a price freeze, it would have meant people were worse off. Now it's the main barrier to bills falling further."
Following the announcements earlier this year that energy companies would shave gas prices, MoneySavingExpert.com founder and editor Martin Lewis also said it was unlikely consumers would see the big cuts that the drop in wholesale prices warrants.
He said at the time that "most providers are petrified of the potential Labour government's price freeze, so they're worried if they make large cuts now, they'll be locked in, even if wholesale prices rise again. If only Ed Miliband hadn't pre-announced the price freeze it, it would've been a strong policy."
Additional reporting by Paloma Kubiak.