The energy watchdog has proposed a ban on unfair price differences.

Ofgem said electricity and gas firms should stop penalising consumers for paying by different methods under proposals outlined in findings from a seven-month inquiry.

The long-awaited report found that while some consumers were missing out on the full benefits of competition, the market was working well for most.

It said it found no evidence of an energy supply cartel and that consumers have benefited from lower prices, better service and a range of deals since the gas and electricity market was opened up to competition ten years ago.

Alistair Buchanan, Ofgem chief executive, said: "These are hard times and we are taking a hard line on behalf of disadvantaged consumers.

"We accept that global influences are pushing up costs but the suppliers must change their behaviour and cement consumer confidence."

Ofgem said it was concerned for more than 4 million customers without gas supply who have no access to the best deals.

And it found the price difference between paying by pre-payment meter and direct debit had surged from around £80 in 2005 to £118, while the difference between paying quarterly and by direct debit had doubled to £80.

Ofgem is also proposing tougher rules on doorstop selling and is pushing for more transparency in energy company financial reporting and better information to help consumers get the best deal.

Ofgem warned that if the industry failed to deliver, it could refer the market to the Competition Commission.

It is now considering the need for new powers to guard against market abuse in the wholesale industry.

It said the findings would be open for consultation until December 1.

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