Davey urges Ofgem to take action if energy firms are overcharging customers
The energy secretary has even gone as far as to urge Ofgem to consider breaking some of the companies up - if the accusations turn out to be true.
In order to look into this matter, he believes the regulator should examine a number of the energy suppliers' gas profit margins - with many standing at five times higher than the equivalent cost for the supply of electricity.
Speaking to BBC's Today show, energy secretary, Ed Davey, said: "I want them [Ofgem] to think radically.
"There could be a number of remedies, including the breakup of some of these companies if they have abused their market power."
According to Davey, gas currently makes up two-thirds of the cost households connected to the grids currently pay on energy bills. By dropping these to a similar level as electricity costs, homeowners could save up to £40 a year according to Davey.
He pointed out in a letter to Ofgem chief executive, Andrew Wright, British Gas were the biggest culprit as evidence suggested they had the biggest share of the UK domestic gas market, and yet tended "to charge one of the highest prices over the past three years, and has been on average the most profitable."
In the letter, Davey also went on to say: "Clearly you will wish to consider whether this is prima facie evidence of an issue in the market and so whether it merits a market investigation reference with the whole gamut of potential remedies that could follow including a breakup of any companies found to have monopoly power to the detriment of the consumer.
"Alternatively you may of course conclude that no action is needed or potentially some intermediate measure which can be taken by the sector regulator."
Remedies suggested by Davey include potentially adopting a different business model, clearer accounting and Ofgem checking just how much money the firms were making.
A British Gas spokeswoman defended the firm suggesting it was happy to participate in discussions on the matter.
She said: ""Further discussions have been arranged over the coming weeks in which we will fully participate.
"The data referred to in the secretary of state's letter has already been fully disclosed and in the public domain for a number of months."
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