Energy Secretary Ed Davey had questioned how much profit some firms were making in an intervention that initially knocked £600 million off the value of Centrica.
In a letter to regulators, Mr Davey estimated that margins on gas bills were up to five times those on electricity. He said he was considering a "break up of any companies found to have monopoly power to the detriment of the consumer".
Within hours Centrica shares were down 3% or 10.3p to 303.85p, while Perth-based rival SSE's shares were down 19p at 1338p. Energy prices have been argued about by all the political parties in recent months,
Labour has pledged a price freeze for almost two years should it win power again in 2015. However, the Tory-LibDem Coalition condemned the idea, suggesting firms would avoid the policy by raising prices in advance.
Instead, last year Coalition ministers rolled back so-called "green taxes", a move they said should allow energy giants to pass on savings averaging £50 per customer. Mr Davey said the latest proposed move could cut another £40 from the average household's bill. He called on regulators to think radically as part of their probe into the industry.
He said: "It's an independent process. They can choose to take no action or to take a full-scale market investigation and, as I set out in my letter, there could be a number of remedies if they go down that route, including the break-up of some of these companies if they have been shown to abuse their market power."
However, Labour accused Mr Davey of failing to take action in spite of evidence "showing [firms] have been overcharging".
Shadow energy minister Tom Greatrex said Mr Davey's figures were not new. He said: "We have been highlighting these issues over the course of much of the last two, two and a half years."
He added that the Energy Secretary had "finally got there, but what we need now is action from Ed Davey to make sure that he reforms the energy market to make sure it's clear, fair and transparent".
He added: "So far all he's done is written a letter. I think he should be doing much more and should have done much more in the last two years."
Labour believes that breaking up the energy companies could be part of the answer to creating a fairer market.
The party has accused the so-called 'Big Six' - Centrica-owned British Gas, SSE, EDF, RWE npower, E.ON and Scottish Power - of having a stranglehold on consumer choice.
Ofgem, the Office for Fair Trading and the Competition and Markets Authority are all investigating competition in the energy retail market.
The first conclusions are due at the end of March.
Centrica-owned British Gas yesterday defended its average 5% profits, saying that such a margin was necessary to allow it to make investments.