Energy companies were threatened with a windfall tax yesterday after Ofgem, the energy markets regulator, advised the Treasury that suppliers will receive a £9 billion benefit from emissions permits.

The proposal was made during talks between the regulator and Alistair Darling, the Chancellor, over soaring household fuel bills. The regulator said that producers such as npower, British Gas and EDF Energy should be obliged to use some of that £9 billion to help their poorest customers.

Alistair Buchanan, Ofgem’s chief executive, said: “This stems from the free emission permits given to companies. That is why Ofgem is renewing its proposal that this windfall could be used to help customers in fuel poverty, who have been hardest hit by the recent energy price rises.”

When the first phase of the EU emissions trading scheme was introduced in 2005, tradeable emissions permits were issued free of charge because the Government wanted to introduce the scheme without causing a huge shock to the system.

It was particularly concerned that generators did not simply shut down dirty coal-fired power stations.

While the rest of Europe introduced a generous allocation that meant their power producers did not even need to cut emissions, Britain alone imposed curbs. If generators are unable to keep within those limits, they have to buy permits in the European market.

The UK has been a net buyer of CO2 emissions permits, effectively from countries that have set limits their industries were able to achieve easily.

Power producers reacted angrily to any idea of a windfall tax, saying that it would jeopardise investment in power stations and could wreck the second stage of the nascent EU Emissions Trading scheme.

David Porter, chief executive of the Association of Electricity Producers, said: “I hope that they are not implying that retrospective fiscal measures should be introduced. Not only would that be unjust, but it would send out the most damaging signal to investors in a vital UK industry, which is poised to spend up to £30 billion on new power stations.”

Any windfall tax would be the second time the industry has had to pay up since Labour came to power in 1997. After Tony Blair became Prime Minister, Labour stuck to a manifesto commitment of raising £5.2 billion from privatised utilities, of which energy companies paid £2.8 billion.

At its meeting with Mr Darling, Ofgem also said that there was no evidence that energy companies were colluding to force up prices to consumers.

More than nine million npower and EDF customers have been hit with gas and electricity price rises this month, adding about £100 to average annual bills. The UK’s other major suppliers, such as British Gas, are expected to follow soon.

There has been particular concern over regular meetings between the “big six” energy suppliers, from which smaller independent suppliers are understood to be excluded.

However, Mr Buchanan said that bills were being driven up by rising global costs of oil, coal and gas, the cost of curbing climate change, increased investment in the energy networks to ensure safe and reliable supplies for customers and a lack of market liberalisation in the rest of Europe.

He told Mr Darling that the slow progress towards an open energy market in the rest of the EU was increasing pressure on prices in Britain. “We are feeling the effect of an opaque, non-liberalised market in the rest of the EU,” Mr Buchanan said.

Following recent allegations of collusion between energy suppliers, the regulator has asked to see evidence of any anti-competitive activity. Ofgem has powers to investigate and can impose penalties of up to 10 per cent of a company’s global turnover.

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