The former business secretary has been critical of Ed Miliband in the past
Lord Mandelson has raised doubts about Labour's plan to freeze energy bills, suggesting people may think it is going "backwards" in its industrial policy.
The former business secretary said he believed Labour had moved on from the days of having to choose "between state control and laissez-faire".
Ed Miliband has defended the pledge to cap price rises, saying the public supports action to make markets fairer.
But a former Labour minister says it marks a return to "tribal socialism".
The Labour leader has spent the day defending his plan to intervene in the energy market if he wins the next election, in the face of attacks from energy firms, business groups and the Conservatives.
“Start Quote
End QuoteEd Miliband insists that he is standing up for ordinary people in the face of abuses. He believes that after the banking crisis that is where the new centre ground is. ”
Lord Mandelson is the most senior Labour figure to publicly raise concerns about the policy and its implications for the party's business credentials.
"At the business department I tried to move on from the conventional choice in industrial policy between state control and laissez-faire," he is reported as saying by the Guardian and the Independent newspapers.
"The industrial activism I developed showed that intervention in the economy - government doing some of the pump-priming of important markets, sectors and technologies - was a sensible approach."
As a result of Mr Miliband's pledge, Lord Mandelson added he believed that "perceptions of Labour policy are in danger of being taken backwards".
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Labour leader Ed Miliband: "I'm standing up for the British people."
Mr Miliband got a rousing reception when he made the commitment during his Labour Party conference speech on Tuesday as activists welcomed plans to tackle recent price rises.
But shares in the leading energy firms fell sharply on Wednesday after they said that such a move might make their businesses unviable and could lead to power cuts.
'Scare stories'Former Labour minister Lord Digby Jones has suggested the last Labour government was to blame for current failings in the market because it piled on to business environmental and social obligations as part of its targets to decarbonise the economy.
Energy profits
The "big six" - British Gas, EDF, E.On, npower, Scottish Power, SSE - made total net profits of:
2009: £2.15bn
2010: £2.22bn
2011: £3.87bn
2012: £3.74bn
"It's a return to ideological tribal socialism... at a time when we need to be globally competitive," he said. "It might appeal to the party faithful but won't create jobs or prosperity.
"He's going to sacrifice Britain's prosperity on the altar of a social tribalism and it's very worrying."
As suppliers stepped up their fightback, Ed Miliband insisted his plan to freeze gas and electricity bills would not lead to the lights going out.
"We will have scare stories from the energy companies, like we had scare stories from the banks - threats, scare stories about regulation," he said.
"I'm not going to tolerate that. The Conservative Party will support them, but I'm in a different place. I'm standing up for the British people."
'Policy unravelling'The Labour leader said he would not stand for suppliers "colluding" to raise prices ahead of the election to neutralise the effect of the cap.
He insisted that the price cap and other policies announced during this week's conference - including a plan to strip developers of land if they do not use it - did not mean Labour was harking back to the 1970s.
"Small business tax cuts, stopping a race to the bottom in skills so we build up a skilled workforce, dealing with some of the problems of housing which are a problem for business - this is good for business, this is good for Britain what we are talking about."
Labour says the energy price freeze, which would last between June 2015 and January 2017 - would save average households £120 a year and businesses £1,800.
But Business Minister Matthew Hancock said Labour's policy was "unravelling" and the government's approach of requiring companies to offer the best tariff to customers was a more "credible" way forward.
One of the country's biggest investors - Neil Woodford of Invesco Perpetual - called Labour's plan "economic vandalism" and warned that "the economy will shut down".
Source: BBC News - Business http://www.bbc.co.uk/news/uk-politics-24277925#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
