Gordon Brown has been accused of paying a £9 billion subsidy to energy companies at a time when millions of British families were struggling to pay their bills.
Liberal Democrat leader Nick Clegg said the utility firms received the multi-billion pounds windfall under the European Emissions Trading Scheme (ETS).
At Commons question time, Mr Brown insisted he was determined to “do everything we can to help the vulnerable families of this country” faced with rising fuel costs.
Mr Clegg said: “This Government has handed over a £9 billion windfall profit to the energy companies through the ETS.”
He asked Mr Brown: “How can you reconcile this huge subsidy with the fact that five-and-a-half million British families and three-quarters-of-a-million more pensioners are set to plunge into fuel poverty.
“How can it be fair to subsidise large energy companies when ordinary families can’t pay their fuel bills?”
Mr Brown replied that he “did not accept” Mr Clegg’s figures and said the Government had increased winter fuel payments to £250, or £300 for people over 80.
The Government had also negotiated a deal with the energy giants to increase to £150 million-a-year the funding to help low-income households.
“We are determined to do everything we can to reduce fuel poverty in this country.
“I do not accept that we have not acted.
“This is a very difficult situation, when oil prices have trebled, and we are determined to do everything we can to help the vulnerable families of this country.”
But Mr Clegg said the Prime Minister’s measures were “tinkering at the edges” of the problem.
“People are struggling to get by now, I’m not sure you understand the pressures families are under,” he told Mr Brown.
Mr Clegg said the poorest families were still paying the highest prices for fuel.
The Spanish government had “clawed back” more than one million Euros of the ETS subsidy and Mr Clegg asked the Prime Minister: “Why can’t you do the same?”
He added: “Will you now compel British energy companies to use more of their £9 billion windfall to install smart meters, insulate more homes and force them to offer their best prices to their poorest customers.”
Mr Brown said: “We have the biggest insulation programme in history to help those people who need draft-proofing and insulation.”
He said the Government had “done more than the Spanish” by negotiating an agreement with the energy companies for £150 million-a-year to help poorer customers “for many years ahead” while increasing the winter allowance.