Why are UK energy companies so powerful?

Despite the fact there is an industry regulator, in the shape of Ofgem, it seems to many people that UK energy companies literally rule the roost and appear to be out of reach of the regulator and the government. So why are UK energy suppliers so powerful?

Despite the fact that successive UK governments have promised to tackle the ever-growing increase in energy prices across the UK, both for consumers and businesses, it is evident that UK energy companies are able to effectively dictate the prices they charge even under the greatest pressure from the government and the regulars. One reason why the UK government appears unable or unwilling to clampdown on the energy sector is because of the need for significant investment in the medium to longer term in new energy sources.

Due to the simple fact that the UK government is unable to finance all new energy sources in the future it will need the assistance of leading UK energy companies such as E.On, British Gas and Scottish and Southern Energy therefore clamping down on prices and reducing their profitability and income would reduce the funds available for future investment. At this moment in time it is consumers and businesses which are paying the price although it has to be said that the wholesale energy markets have been very volatile over the last two years.