Britain's energy watchdog is widely expected to refer the "big six" gas and electricity providers for a full-scale competition probe on Thursday in a move that could lead to a radical overhaul of the sector.

Ofgem is likely to announce plans to call in the new Competition and Markets Authority (CMA) when it publishes its "state of the market" report, which could see the major players face the threat of a break-up.



It would mark the first full-scale competition probe into the energy market and would see the UK's biggest suppliers come under an unprecedented level of scrutiny.



Ofgem is expected to hold off from an immediate referral, instead firing the starting gun on a one-month consultation on the move.



It comes after soaring energy bills and amid fears that competition in the sector is failing households. Calls have been increasing for a detailed inquiry after the latest round of bill hikes, with political pressure intensifying after the Labour leader, Ed Miliband, pledged to freeze tariffs in 2015 if the party wins the general election.

Suppliers have blamed rising costs of buying and delivering wholesale energy as well as so-called "green levies" by the government on bills, designed to pay for low-income households to install energy-saving measures.



David Cameron announced in October that levies would be rolled back, resulting in tariff hikes by suppliers being scaled down. But he also signalled a review of competition within the energy markets by regulators including Ofgem.



In February the energy secretary, Ed Davey, urged Ofgem in a leaked letter to "think radically" as it considered whether to refer the sector for a full CMA probe and raised the prospect of a break-up of suppliers.



The consumer group Which? and the Federation of Small Business were among the latest to press for a CMA inquiry, writing a joint letter earlier this week to the Office of Fair Trading, Ofgem and the CMA saying that competition needed to be increased.



The groups said nine in 10 consumers believed the energy market should be referred for further investigation, while seven in 10 were worried about energy prices and only one in five trusted energy companies.



A CMA inquiry could lead to a major shake-up, potentially forcing providers to separate their power generation and retail businesses.



Big Six supplier SSE has announced it is carrying out a "legal separation" of its wholesale arm – which includes energy production and storage – from its retail division selling energy to homes and businesses in an apparent attempt to forestall the probe's findings. But other solutions from the CMA might include measures to improve consumer awareness and choice.