Ofgem 'in last-chance saloon' over energy bills: Ministers warn regulator will be scrapped unless it breaks monopoly of Big Six firms Regulator currently making assessment of energy market competition Ministers want review to shatter dominance of big firms and slash bills Critics of the firms say they make excessive profits in wholesale business Ministers have warned Ofgem that it will be scrapped if it fails to shake up the market to end the monopoly of the Big Six energy firms. The regulator has been told it is in the "last chance saloon" and must get more suppliers into the market and find a way to curb the profits of the main suppliers, who have cashed in while consumers have seen bills soar. It is conducting a joint assessment of competition with the Office of Fair Trading and the Competition and Markets Authority, due to report in March. Burning money: Energy regulator Ofgem has been told it must get more suppliers into the market and find a way to curb the profits of the main suppliers, who have cashed in while consumers have seen bills soar Senior sources say ministers expect a hard-hitting review that will shatter the dominance of the Big Six and produce concrete plans to slash bills. A senior Government source said: "Ofgem was set up to regulate the market and protect consumers from being over-charged for their gas and electricity. But it is quite clear that in recent years it has lost sight of this objective. There is obviously a problem and Ofgem must resolve it. We are optimistic that they will but this is last chance saloon. Ofgem need to realise that this competition inquiry is their last opportunity to prove that they get it. Ministers want to see an end to the cartels operated by the energy firms, in which one part of the company sells energy to the retail arm of the same firm. They want to see a market where the Big Six have to sell energy to smaller firms at the same rates, breaking the dominance of the big beasts. Energy firms insist their retail profit margins are tiny. But critics, including consumer group Which?, say the companies are merely transferring their excessive profits to their wholesale arms - which account for about 60 per cent of domestic energy bills. The latest figures from Ofgem show that in 2012 the big six made 4.3 per cent profits on their retail arms or £53 from an average £1,174 combined bill. But the same figures show that profits made on the companies" wholesale operations was 20 per cent - or £122.40 on the average bill. 'Long overdue': Shadow Energy and Climate Change Secretary Caroline Flint said it's time to break up the Big Six energy firms and freeze customers' bills Ministers believe that Ofgem has got too close to the energy companies and failed ordinary home owners. If the regulator fails to take a tough line, the Quango faces abolition and the Department of Energy and Climate Change could take control of regulation. One senior official said: "Ofgem have been a nightmare for years. They keep Government in the dark about what they're doing and then spring things on us at the last minute - usually at 3.30 on a Friday afternoon. There is not much sympathy for them in Whitehall. Richard Lloyd, executive director, of Which? said: "It's vital that the first Annual Review of competition clearly identifies why the market is failing and what needs to change. We want to see radical solutions to improve competition and keep prices in check, like the biggest energy companies being forced to separate wholesale generation from the retail arms of their business. Shadow Energy and Climate Change Secretary Caroline Flint added: "It's long overdue for the Government to recognise that Ofgem has failed to stand up to the big energy companies and defend consumers. But if ministers are serious about stopping people being ripped off they should back Labour's plans to create a tough new regulator, break up the big energy companies, put an end to their secret trades and freeze energy bills. A spokesman for Energy UK, which represents the energy companies, said: "The energy industry will co-operate with any inquiry and supports moves to foster competition and more transparency in the energy market." An Ofgem spokesman said: "We don't comment on speculation. We are working with the OFT and the Competition and Markets Authority on our assessment of competition in the energy market and we will be publishing by the end of March. We are implementing the biggest changes to the retail energy market since competition began to make it simpler clearer fairer for consumers. We have also secured over £75million in fines and payments for consumers since April 2010.