Government plans to revamp the electricity market could lead to higher bills, less competition and put off investors, MPs said today.

The shake-up Energy Bill, designed to create a system of long-term contracts giving power companies a guaranteed price for their low-carbon electricity, has raised fears with a cross-party Westminster committee that it will fall short in delivering change.

The Commons Energy and Climate Change Select Committee has warned that firms capable of building the infrastructure may be put-off because the Treasury will not underwrite new investment in nuclear and renewable power.

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Committee chairman Tim Yeo MP said: "The Government is in danger of botching its plans to boost clean energy because the Treasury is refusing to back new contracts to deliver investment in nuclear, wind, wave and carbon capture and storage."

The Conservative former Environment Minister outlined that reforming the electricity market was essential, but believes the draft might increase the power of the Big Six companies rather than widen competition.

He said smaller producers could be "squeezed out" under the shake-up and called for clearer policy targets so investors could plan ahead.

Mr Yeo added: "The new contracts proposed by the Government will not work for the benefit of consumers in their present form."

Welcoming the committee's report and their recognition of the importance of the Bill, Energy Secretary Ed Davey said: "The Energy Bill will enable us to make radical changes to the electricity market that deliver investment in secure, low carbon, affordable energy.

"We are determined to use the pre-legislative scrutiny period to develop a robust and effective Bill with the interests of both consumers and investors at the heart."

(HMc)