Speaking in an opposition day debate on energy prices yesterday, Ed Davey admitted there was a “lag” in falls in wholesale electricity and gas prices being passed onto energy customers.
He said: “I think there is a need for intervention—that is what I have been saying.”
However, the energy secretary rejected calls from Labour to give the regulator powers to force suppliers to cut their prices when wholesale prices fall, saying the proposal would be “nothing short of a disaster”.
Davey stated that Labour’s proposal was “the exact opposite of a price freeze” and would result in energy prices tracking the “very volatile” wholesale markets.
The energy secretary slammed Labour’s approach towards energy policy as “incoherent and inconsistent” and stated that the “right approach” was to back the “independent experts” at the Competition and Markets Authority (CMA) “to ensure that our markets work for consumers”.
Citigroup also said Labour’s energy policies were “becoming increasingly incoherent” after initially calling for Ofgem to be abolished, before then proposing to give the regulator further powers.
Shadow energy secretary Caroline Flint accused the government of leaving consumers in a “catch-22 situation” whereby an uncompetitive market and a lack of price regulation results in unfair prices.
She stated that the uncompetitive retail market has resulted in the suppliers lacking the motivation to “out-compete their competitors”.
Flint added that the claim that suppliers have failed to pass on the fall in wholesale prices as a result of the Labour’s plans to freeze prices, should they win the 2015 election, was “ludicrous” and “does not stand up to the slightest scrutiny”.
The motion to give the regulator powers to force energy suppliers to pass on prices cuts to consumers when wholesale costs fall, if suppliers failed to do so, was voted down by 283 votes to 228.