by business editor Trevor Sturgess

Small firms have warned the Prime Minister's controversial pledge to compel energy suppliers to switch customers to the lowest tariffs could lead to price fixing.

David Cameron's proposal surprised the energy sector amid claims that it would threaten competition in the energy sector.

It came shortly after most of the big six energy suppliers announced inflation-busting price increases.

Roger House, chairman of the Federation of Small Businesses in Kent and Medway, welcomed the Prime Minister's determination to tackle rising energy bills.

"However, there is a real risk that forcing energy companies to put customers on the cheapest tariff could lead to price fixing and erode what little competition there is in the market," he said.

But if it went ahead, he hoped the Government would apply the legislation to the smallest businesses.

"We want to see plans for the big six energy companies to put their customers on the cheapest tariff extended to micro-businesses too," Mr House said.

"What we really need is for Ofgem [the industry regulator] to deliver a truly competitive market with its ongoing retail market review work.

"Complicated tariffs, making it difficult to switch and rolling over contracts from one year to the next have plague small businesses' relationship with their energy suppliers for too long and we need to see effective action now."

"What we really need is for Ofgem to deliver a truly competitive market with its ongoing Retail Market Review work.

"Complicated tariffs, making it difficult to switch and rolling over contracts from one year to the next have plagued small businesses’ relationship with their energy suppliers for too long and we need to see effective action now."