By Karolin Schaps and Nina Chestney
LONDON (Reuters) - Britain's biggest energy suppliers will have to freeze prices for 4 million households as part of competition watchdog proposals designed to shake-up a market controlled by just a handful of players.
Britons' energy bills doubled over the last decade to around 1,200 pounds ($1,702) a year, angering consumers and prompting an investigation by the Competition and Markets Authority (CMA) in 2014 into whether the country's largest energy suppliers have distorted competition.
The watchdog said competition was not working in some parts of the market and on Thursday proposed a price freeze for pre-payment meter customers until 2020 that will reduce their bills by a total of 300 million pounds a year. Those customers tend to be lower income households.
The proposal has been watered down from initial suggestions made last year in which the CMA floated the idea of a price cap for all customers on the most expensive tariffs.
The CMA said that between 2012 and 2015 customers may have been paying around 1.7 billion pounds a year more than they would have done in a competitive market.
The inquiry, which is set to conclude by June 25, is intended to clear up once and for all whether SSE (LON:SSE), Iberdrola's Scottish Power, Centrica (LON:CNA), RWE's npower, E.ON and EDF (PA:EDF) Energy were abusing their control of the market.
The "Big Six" still control roughly 85 percent of the energy retail market but smaller suppliers, such as Good Energy, First Utility and Ovo Energy, are rapidly gaining market share by offering cheaper deals.
RWE this week announced it would cut more than a fifth of staff at npower after it lost customers to rivals.
Shares in London-traded suppliers SSE and Centrica opened 1 percent and 0.8 percent higher, respectively, on Thursday.
The watchdog also proposed that a regulator-controlled database should be created to allow rival suppliers to contact customers who have been on more expensive tariffs for three years or more with better deals. [L5N16G474]
"Given the scale of the problems and the potential savings on offer, we think bold measures like giving rival suppliers the chance to contact long-standing SVT (standard variable tariff) customers are justified," Roger Witcomb, chairman of the energy market investigation, said in the document.
In an initial response, Centrica said it most of the proposals would enhance competition and benefit its customers.
Analysts said the investigation should give companies greater clarity about what was required.
"The remedies will obviously have some impact, but they are reasoned, rather than draconian, and the conclusion of the investigation should allow for increased regulatory stability," said Angelos Anastasiou, utilities analyst at Whitman Howard.