Energy companies are overcharging customers “in many cases”, Ofgem’s boss has said.

Chief Executive Dermot Nolan believes suppliers are “consciously charging as high as they think people will get” because the market is not working as competitively as it should be.

Speaking to BBC 4 Radio’s Today programme, he added: “The biggest component of the energy bill is the wholesale cost, approximately half the bill, maybe a shade under. It’s fallen by over a third in the last year, year and half. We really should be seeing bigger retail cuts than we’ve seen so far.

“I think the best protection for customers in the long run is a fully competitive market. I don’t think it is, which is why we referred the market to the Competition and Markets Authority who are due to report in the very near future on that.”

Mr Nolan said the best protection consumers currently have is to switch suppliers.

“There are very good options out there. There are deals potentially making savings of up to £300 and I say it’s never been easier to switch and we’d very much encourage people to do so,” he added.

Lawrence Slade, Chief Executive of Energy UK, defended the suppliers claiming they are bringing down their prices “with cheaper tariffs launched almost every week”.

He added: “Since January 2014 the cheapest tariffs have fallen by around £200. There are now over 50 deals under £1,000 being offered by 30 suppliers operating in the market. Wholesale prices make up less than half of the average bill and the majority of the rest falls outside suppliers’ control so there will always be a difference between wholesale price falls and what customers actually pay.”

Earlier this week, regulator Ofwat was blamed for high water bills by a committee of MPs.