State intervention has “continuously failed to provide consumers with the best outcomes,” according to the research from the free market think tank.
Policies such as a price freeze, suggested by Labour leader Ed Miliband, or a windfall tax, as proposed by former Conservative Prime Minister John Major, would seriously undermine investment into the UK energy sector, the report said.
“Politicians need to realise that more controls are not the answer to energy companies not behaving in a manner they see fit,” said Mark Littlewood, director general at the Institute of Economic Affairs.
“Proper privatisation and a return of market forces are the best ways to ensure both security of supply and the lowest possible prices for consumers.”
The big six energy suppliers have all unveiled inflation-busting price hikes in recent months, which they blame on green levies and higher wholesale costs. The government has pledged to shift some of the charges away from bills and into general taxation.
The Organisation for Economic Co-operation and Development (OECD) and industry bodies also warned this week that a price freeze could hinder investment.