Action is needed within the gas and electricity industry to ensure that the UK maintains a good supply of energy and consumer costs are not pushed too high, according to Ofgem.
The government's energy watchdog has published the Project Discovery report which identifies five issues facing the UK power industry.
It believes that action is needed because of a range of factors, including the global financial crisis, strict emissions targets and the increasing dependence on gas imports.
Concerns were also raised that the rising cost of gas and electricity could mean that some people are unable to afford the energy needed to meet their needs.
Alistair Buchanan, chief executive of Ofgem, said: "We do not advocate change lightly, but all the facts point to the need for reforms now...Acting earlier will also help keep costs as low as possible for consumers and business."
Think Money recently said that comparing and switching energy supplier could help households avoid debt on their fuel bills.