* Government to review competition in energy sector
* Cameron says he will cut back green regulations
* Coalition partners angered by 'panicky U-turn'
* Rising energy prices dominate political debate
By Peter Griffiths and William James
LONDON, Oct 23 (Reuters) - British Prime Minister DavidCameron sought to regain the initiative in a political battleover soaring energy prices on Wednesday, promising to improvecompetition in the sector and cut green taxes that have helpedinflate prices.
His announcement caused a rift with his coalition partners,the Liberal Democrats, who dismissed it as a panicky policy thathad been "made up on the hoof ... by a party getting cold feeton the environment".
Energy costs have become high-profile political football inBritain since several energy firms unveiled sharp priceincreases and the opposition Labour Party promised to freezebills for 20 months if it won the next election in 2015.
How much Britons pay to heat their homes has played into awider debate about the cost of living, which has risen asinflation and price rises from everything from utility bills totrain tickets have outstripped stagnant wages.
"We need to roll back some of the green regulations andcharges," Cameron told parliament during an emotionally-chargeddebate. "We'll be having a proper competition test carried outover the next year to get to the bottom of whether this marketcan be more competitive."
Even though the economy is improving, Labour, who are justahead in most polls, says many people are faced with a choicebetween "eating and heating", and it accusing Cameron'sConservatives of being out of touch.
Cameron described the cost of energy as unacceptable, butsaid Labour's plans to freeze prizes were an unworkable "con".He too was prepared to intervene in the sector, he added, but ina way that was practical.
A Liberal Democrat source said: "The Conservatives have putno properly worked-up policies in front of us. (We) will notallow the Conservatives to undermine our commitment to theenvironment, hurt the fuel poor, or destroy our renewable energyindustry."
Energy supplier RWE npower raised electricity andgas charges by an average of 10.4 percent on Monday. Thatfollowed Centrica's average 9.2 percent rise and an 8.2percent increase by SSE. Centrica's shares fell 1.2percent after Cameron spoke.
The other members of the "Big Six" who control 99 percent ofthe British retail energy market are Scottish Power, a unit ofSpain's Iberdrola, EDF Energy and E.ON.
Labour leader Ed Miliband seized the initiative on energyprices last month with a broadside against a market he describedas broken with a pledge to freeze bills. Cameron dismissed theidea as unworkable but conceded that Miliband had "struck achord" at a time of squeezed wages and rising household bills.
He came under further pressure on the issue on Tuesday whenformer Conservative prime minister John Major suggested Britainshould tax energy firms' "excess profits".
Labour energy spokeswoman Caroline Flint said Cameron was"panicking over his failure to address soaring energy bills".
Environmental taxes and social charges contribute nearly 10percent to domestic energy bills, which average more than 1,200pounds ($1,900) a year for each household.
The competition review will start in the coming weeks andwill look at "prices, profits and barriers to new entrants" tothe sector and rule nothing out when it comes to making it morecompetitive, Cameron's spokesman said.
The energy companies blame the price rises on wholesaleprices, the cost of the supply network, and the government'senvironmental and social programmes.
RWE npower Chief Executive Paul Massara welcomed Cameron'sannouncement as an "important step in cutting real energycosts". An SSE spokesman said "a balanced audit of competitionin the market should be a useful additional step towardsbuilding customers' trust".
- Politics & Government
- Budget, Tax & Economy