Tariff price differential is ‘most likely’ government intervention

Government will act on its threats to intervene in the energy retail market, claims Massara

Former Npower chief executive Paul Massara has predicted ministers will act on recent threats to intervene in the energy retail market, with a cap on the difference between suppliers’ most expensive and cheapest tariffs being the most likely outcome.

Massara, who is now chief executive of North Star Solar and was recently appointed to the board of blockchain company Electron, told Utility Week “we’re waiting to see what the government will do”, and added “I think there will be an intervention”.

“I think probably the most likely position is they cap the differential between standard variable tariff (SVT) and non-SVT deals for a portion of the market,” he continued.

“Already we have prepayment meters, which have a regulated rate. What you might see is a cap between the differential on more of the market, or you might see an expansion of the fixed-rate cap to more customers, maybe vulnerable customers.”

Massara added the government has now associated itself too closely with market intervention to back away without taking action.

“I think there’s a case where you can see Theresa May has come out time and time again and said ‘we will intervene if we don’t think markets are working correctly’. There are only so times you can say that before you have to do something.”

But Green Energy chief executive, Doug Stewart, has warned that introducing energy price regulation in the form of a capped differential between tariffs, will have unintended consequences.

He branded the idea, which was recently floated by Conservative MP John Penrose, “a joke” adding that it would cause “prices to go up”.

“The SVT is where the real price of electricity is,” claimed Stewart. If a cap is put on the difference between SVTs and the cheapest deals on the market, then he said “all the cheap deals will creep up towards it” and “the cheap deals will disappear”.

Steward concluded the government is “playing with fire” with its plans for market intervention.

Speaking last month, the prime minister said the forthcoming consumer green paper will go beyond just encouraging customers to switch suppliers, as the energy market is “manifestly not working for customers”.

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