Policy & regulation

Electorate support for cap gives reason to proceed “without delay”

Energy secretary Greg Clark has written a personal letter to Ofgem’s chief executive, asking him to “quickly” advise on ways to deliver better consumer protections in the energy market.

In his letter to Dermot Nolan, Clark wrote: “I am sure that you share my concern that the detriment to retail energy customers on poor value standard variable tariffs, which was identified by the Competition & Markets Authority as averaging £1.4bn a year, must be brought to a rapid end.”

He highlighted the Conservative party’s manifesto commitment to “extend the price protection currently in place for some vulnerable customers to more customers on the poorest value tariffs.”

And the fact that other parties also proposed market intervention.

“I consider that the endorsement of this approach by an overwhelming majority of the electorate constitutes good reason to proceed without delay,” Clark continued. He also said that Ofgem has the power the address market problems and asked Nolan to deliver advice to government on how to act on three specific matters:

  • Safeguarding customers on the poorest value tariffs
  • Ensuring that micro businesses are fairly treated
  • Considering the future of standard variable tariffs I understand that you may be required to consult formally on any proposed changes to licence conditions.

Clark also said he would be “surprised and disappointed if the major energy companies did not acknowledge the need for such changes and be supportive of them”.

He called for interventions to be suggested and implemented “quickly” to ensure “there is common treatment across the industry”.

Responding to the letter, Ofgem issued a comment assuring that it shares government’s concerns “that the energy market needs to work better for all consumers and that energy companies need to do more to help loyal consumers get a better deal”.

“We will shortly be setting out the work we have underway and further options we can explore in the light of the Government’s plans,” it concluded.

Clark’s letter to Nolan follows wording in the Queen’s Speech which suggested government might not press ahead quickly with market intervention. The background notes for the speech said government would use a green paper to consult on whether legislation of regulatory action will deliver the best market outcome, before pushing ahead.

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