THE energy market isn't working, says Chris Huhne, Britain's energy secretary. At the Liberal Democrat party conference in September he attacked firms for “predatory pricing”. Gas and electricity prices have risen by nearly a fifth this year, which helped push the latest consumer-price index of inflation, released on October 18th, back to its 2008 peak of 5.2%. This week David Cameron, the prime minister, held a summit with the utility companies to whip them into line.

But an ear-bashing from politicians won't fix the problem. At stake is more than grumbling by domestic consumers. Since 1990 Britain has boasted one of the most liberalised energy markets in the rich world, and could initially point to some of the lowest prices in Europe. No longer. Bills are rising and fuel poverty, defined as spending more than 10% of household income on energy, is growing: Consumer Focus, a watchdog, predicts this year's price hikes will increase the number of households in fuel poverty from 5.1m to 6.4m.

Energy companies offer a simple explanation: oil and gas prices have soared since 2003. This hits Britain hard as North Sea reserves dwindle and the country imports an ever-greater share of its energy. It also generates more electricity from gas than from any other single source. But bills are rising faster than wholesale prices (see chart), so Mr Huhne thinks the problem is a lack of competition among the “Big Six” energy companies which supply 99% of retail customers. According to Ofgem, the industry regulator, profits in the retail market are increasing: margins rose from 1.3% in June to 9% in October. The firms counter that their retail arms used to make losses. But utility firms have a poor reputation for openness. Bills go up faster than they fall in response to changing fossil-fuel prices. Which?, a consumer group, found this month that some companies failed to quote the cheapest tariffs over the phone. Despite regular reviews of the retail market, public trust in the utilities is weak. Ofgem is now urging them to simplify the bamboozling range of 400-plus tariffs which make price comparisons so tricky. Mr Huhne wants consumers to shop around to find the lowest rates—only a sixth of households switched tariff last year. These are good ideas. But if all customers pick the lowest prices, those tariffs will rise, says Ronan O'Regan of PwC, a consultancy. No country has a thriving retail market where consumers constantly switch between providers. Even if comparisons are easier, wholesale prices, which make up more than 50% of a bill, are hard to verify. This is partly because suppliers buy most of their energy from their own generating arms, rather than on the open market. This month one of the Big Six, SSE, vowed to “transform” this opacity by trading more power on the day-ahead market. But more electricity would have to be auctioned on the longer-term market to make pricing open and attract new entrants. Ofgem says the amount sold in this way remains pitifully low. The regulator is considering forcing companies to trade at least 25% of their power on the longer-term market. Tim Yeo, the Conservative chair of a parliamentary committee on energy and climate change, thinks this is insufficient: he reckons firms would have to trade about two-thirds to make wholesale prices—and bills—transparent.

None of this would ensure lower prices or a more competitive industry, reckons Boaz Moselle of FTI, a consultancy. “You've got to be realistic about how good this market is ever going to be,” he says. Barriers to new entrants remain, such as a shortage of credit and historically low retail margins. And in a market where the end product (gas and electricity) is the same whoever supplies it, there is currently little room for innovation or product differentiation, unlike with mobile phones or supermarkets, for example.

Unsurprisingly, energy firms agree. Three of them (E.ON, RWE npower and EDF), are so fed up with public mistrust that they want the Competition Commission to open a formal investigation into the market. Ian Marlee of Ofgem isn't keen: he says a referral could take up to three years and delay the £110 billion ($174 billion) of investment in new generating capacity needed to replace ageing power stations in the next decade.

This week's summit yielded little of substance. But the cost of energy will remain politically controversial because Mr Huhne's other policies mean that bills are likely to keep increasing. Whatever happens to fossil-fuel prices, the government is committed to a greater reliance on costly low-carbon energy sources. So if government and utility firms are to convince consumers that high prices are warranted to tackle climate change, they must reach an accommodation. Simply relying on customers to pick cheaper tariffs won't solve the broader problems associated with steadily rising bills, observes Mr Moselle. “You can't delegate social policies to energy companies,” he says.