Ed Davey told the House of Commons today that the growth of independent suppliers who are challenging the six major energy companies would be boosted by the referral.
He also said that the government “will be active” during the inquiry to support consumers with halving switching times, publishing the fuel poverty strategy, and “boosting independent suppliers” further.
Davey told MPs the referral by Ofgem was “a tough but sensible decision” and “is a course of action that should not be lightly undertaken, particularly at a time when the energy market is going through radical changes to introduce low carbon generation while ensuring energy security”.
He did however state that over the long-term this was the “right way” to restore consumer trust and to create certainty for investors.
Davey also refused criticise the vertical integration model when he said it “may be in the consumer’s best interests and ultimately save them money” but warned against “rushing to judgements and rushing to solutions”.
He also slammed Labour leader Ed Miliband for failing to reform the market and ensure it was competitive when he was the energy secretary when he said: “ flunked it when he had the chance.”
Continuing with his attack on Labour, Davey added that he is protecting the smaller companies from a price freeze as Labour’s proposals would “put them out of business”.
Labour’s shadow energy secretary Caroline Flint welcomed the referral to the CMA but said “a full blown market inquiry is confirmation that the energy market is broken.”
She added there are “serious problems” with the way the energy market currently works and once again called on the Davey and the government “to protect consumers” from the flawed market by freezing energy bills until 2017.