A study by independent consultancy Cornwall Energy has revealed that the potential price freeze would “jeopardise” the growth of the smaller suppliers, which now have a 5 per cent market share.
The study said that a freeze to the tariffs would prevent the smaller suppliers from passing through any increasing cost of charges to their customers, and because they are smaller companies, would not be able to afford to take the financial hit.
In order to manage the increase costs, the report said the suppliers would have to add a minimum of £60 (5 per cent) to dual fuel bills in advance of the price freeze.
The increase could be as high as £80 (6 per cent) as a minimum advance as the study said the suppliers may price in a “risk premium” to hedge against unexpected volatility in the wholesale markets.
The report added if a price freeze was implemented, there should be a number of mitigations to “ensure independent suppliers are not squeezed from the market” reducing competition for consumers.
These include targeting a freeze on customers who have not recently switched, and exempting customer on fixed, negotiation, green, or a specialist tariff.
Cornwall Energy managing director Nigel Cornwall said: “Independent energy suppliers have brought considerable benefits to businesses, and are now doing the same for households.
“While political concerns about the state of the market are understandable given rising bills, we believe that a blanket price freeze would turn friendly fire on the smaller players whose competitiveness is doing ever more to keep bills down and improve service to customers.”