Labour has backed the business select committee’s call for the government to avoid further delay on legislating to introduce a cap on standard variable tariffs (SVTs).
Following the publication earlier today (13 February) of the committee’s pre-legislative scrutiny report into the government’s draft energy price cap bill, shadow business secretary Rebecca Long Bailey, said: “Theresa May promised a price cap during the election campaign. We are now almost on the other side of winter and with four million households affected by fuel poverty in the UK, the government must not delay this legislation any further.”
Labour has pledged to introduce an emergency price cap, which keeps average bills below £1,000 per year, while it radically reforms the energy market by creating publicly owned and locally accountable energy companies and co-operatives to compete with existing private suppliers.
However former Tory minister John Penrose criticised the committee for endorsing the government’s proposed absolute cap on energy prices, which the MPs recommend should be reviewed on a six-monthly basis.
The MP, who helped to lead a cross-party campaign by backbenchers last year to curb household energy bills, warned a rigid cap would be too inflexible.
He said: “The select committee has done important and invaluable work in scrutinising the draft bill, but I’m afraid they’ve also proposed an “absolute cap”, where Ofgem’s regulators would meet every six months in a room to pick a number.
“This would be a highly distorting approach, would reduce customer choice and competition, create a feeding frenzy for lobbyists, and would be out of date the moment wholesale gas prices change, which happens every day.”
Gillian Guy, chief executive of Citizens Advice, backed the absolute cap but expressed concerns over the committee’s endorsement for its introduction on a temporary basis.
She said: “We continue to hold reservations over the inclusion of a sunset clause tied to an arbitrary date. The decision to remove consumer protections should be dependent on whether the need for such protections still exists, not a fixed calendar date.
“The committee is right to point out that, even after any government price cap is lifted, people in vulnerable circumstances will need protection from overcharging. We look forward to working with the government to ensure that these protections are put in place as soon as possible”.
Ed Kamm, chief commercial officer at Shell-owned First Utility, backed the committee’s finding that the big six energy companies only had themselves to blame for the proposed price intervention.
He said: “The select committee’s report is just the latest evidence that we’re operating in a two-tier market where those who shop around get good deals, but the millions of customers on default tariffs from the incumbent suppliers have been paying over the odds for many years.
“The report describes a ‘clear lack of will on the part of the big six’ to address this which underlines the fact that they have only themselves to blame for the price cap. It is the inevitable consequence of a lack of regard for their customers.”