The Conservatives have confirmed an energy price cap for the single variable tariff will be a key component of their general election manifesto, prompting warnings it will sound the “death knell for competition”.
According to reports in the Sunday newspapers, the party’s manifesto, which is due to be published shortly will include a price cap, which will save the average family around £100 a year.
Speaking on yesterday’s Sophy Ridge on Sunday programme on Sky News, pensions secretary Damian Green, said “we do think that the energy market isn’t working properly and we do want to change the way it operates”.
In an interview with Utility Week prior to the latest Tory commitment to a price cap, Eon UK chief executive Tony Cocker said the prospect of intervention was a “Sword of Damocles” hanging over the sector and “it really adds to – big picture – investor uncertainty in the UK energy sector”.
Talking on Sky News, Green also denied that the Conservatives were simply replicating plans devised by the former Labour leader, Ed Miliband, to limit energy prices back in 2015.
“Labour would have imposed a freeze at a higher level than the market was giving,” said Green.
The pensions secretary said Ofgem will be able to cap prices, but “in relation to what the market price is”.
“We are proposing, as I say, a more flexible system, which will be able to react to the market, but which will mean that any energy company that starts trying to exploit its customers won’t be able to do so, using Ofgem, the regulator, to make sure energy prices remain fair.”
Both Theresa May and business secretary Greg Clark have spoken recently about how the Conservatives were looking to introduce a cap in the consumer green paper.
The chief executive of trade body, Energy UK, Lawrence Slade warned against a wider price cap, which he said would “undermine so many of the positive changes that we are seeing in the retail market”.
“Intervention on this scale will additionally create huge uncertainty around Government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system,” said Slade.
But the founder of Octopus Energy, Greg Jackson, welcomed the prospect of an energy price cap.
“The big energy companies are bringing this action on themselves,” said Jackson. “For too long, they’ve been able to pass the costs of their gross inefficiency on to their customers.
“With unnecessarily complex prices, and opaque bills, they make it virtually impossible for customers – or even regulators and the government – to know the real price of energy.”
And the head of regulation at uSwitch.com, Richard Neudegg, said price caps “may sound like a silver bullet”, but further intervention could also “have the unintended effect of leaving consumers worse off”.
“A price cap would be the death knell for competition,” warned Neudegg.
Speaking to Utility Week last month, former Npower chief executive, Paul Massara said he believed the government would go for a cap on the difference between suppliers’ most expensive and cheapest tariffs being the most likely outcome.