UPDATE 2-UK weighs introducing criminal sanctions against energy firms
* Government responds to political row over energy costs
* Says market manipulation may lead to criminal sanctions
* Launches market review, says report is due next spring
By William James and Andrew Osborn
LONDON, Oct 31 (Reuters) - Britain is considering introducing criminal sanctions against energy firms that manipulate the market at the expense of consumers, energy minister Ed Davey said on Thursday.
The announcement follows decisions by four of the six largest suppliers unveiling steep price rises.
Energy policy has shot up the political agenda after the opposition Labour party promised in September to freeze energy prices if it won power in elections in 2015, stirring a debate about squeezed living standards.
Pledging to take a tough line against Britain's big six energy companies, who together control 99 percent of the retail market, Davey said the government was considering ways to punish any firm that abused its dominant market position.
"I intend to consult on the introduction of criminal sanctions for anyone found manipulating energy markets and harming the consumer interest," Davey told parliament.
Such market abuse is currently a civil offence. But if the government made it a criminal one energy executives could be jailed if their company was found guilty of market manipulation.
That would bring it into line with rules governing financial markets, where manipulation is already considered a criminal offence.
Lawmakers have accused the "big six" energy firms of colluding to produce above-inflation price rises which they unveiled just as Britain entered its coldest months.
Bosses from RWE nPower, EDF Energy, Centrica, SSE, E.ON. and Scottish Power, a unit of Spain's Iberdrola, dismissed those claims earlier this week.
The Conservative-led government's response to Labour's price freeze plan has focused on ways to introduce more competition into the market to help lower customers' bills.
Davey, a member of the Liberal Democrat junior coalition partner, said he wanted firms to allow customers to change suppliers within 24 hours, rather than within five weeks as is currently the case.
"We are prepared to take action if required to compel those who are dragging their feet," Davey said.
Prime Minister David Cameron announced last week that the government planned to instigate an annual review into competition in the sector.
Davey said that review would start immediately and produce its first report around the end of the first quarter next year.
"We don't need another review," said Labour's energy spokeswoman Caroline Flint. "We need action, action to freeze people's energy bills and to fix this broken market."
At a public hearing with energy bosses earlier this week, lawmakers from a cross-party parliamentary committee expressed concerns about the way firms who also generate electricity account for trades with their retail operations.
Davey said the industry regulator Ofgem would be investigating whether energy companies' financial accounts were sufficiently transparent. Their report will be published around the same time as the competition review, he said.
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