Customers could be left short changed if the energy price cap is only reviewed once every six months, an MP has warned.
John Penrose, who helped to lead the backbench campaign in Parliament for a cap on standard variable tariff (SVTs), said he is “absolutely delighted” by today’s (26 February) announcement that the government is pressing ahead with legislation on the issue.
But he expressed concerns the government’s move to allow the cap to be reviewed at six-month intervals, also announced today, would not allow sufficient responsiveness to fluctuations in wholesale prices.
He said: “This is a great day. But we can’t rest on our laurels. The details matter too, otherwise we might magnify rather than solve problems.
“If the cap is set by a committee of regulators every six months, and wholesale prices fall, the rip-off will get worse and we will have brought in a bizarre law that embeds and legitimises rip-off prices.
“If we instead design a cap which shadows the really competitive part of the market that already gives switching customers great deals, we will be protecting loyal customers from rip-offs no matter what happens to wholesale energy prices in future. When loyal customers get the best deals, rather than the worst rip-offs, this battle will finally be won.”
Peter Earl, head of energy at comparethemarket.com, expressed concern that customers could be lulled into complacency by the cap.
He said: “The price cap legislation will not fix the problems in the energy market. It targets standard variable tariffs, whose days already look numbered with some of the largest suppliers in the market already having published plans to scrap them for their customers.
“The danger is that energy customers are lulled into staying with one provider rather than shopping around in the mistaken belief that the cap will level the playing field. It won’t – thousands will still be on uncompetitive default tariff.
“The energy market needs far more wide-ranging reforms to make it easier to understand for consumers.”
But the government’s announcement was welcomed by Greg Jackson, chief executive of challenger firm Octopus Energy, which has campaigned for the introduction of a cap.
“As the energy company that has led the campaign for an energy price cap, we are delighted the government is bringing forward this vital legislation.
“The power imbalance between customers and companies has stifled competition and led to rip off prices and cynical loyalty penalties which we hope the government will also address with this legislation.”