Energy policy facing renewed political pressure

Theresa May staked out a populist agenda at the Tory conference, and energy is once again under attack. Mathew Beech reports.

Prime minister Theresa may has set out her ambition to create “a country that works for everyone” – a typical slogan to accompany any party conference.

In her keynote speech, she set out how the Conservative government would achieve this. It is a lurch to the left, into traditional Labour territory of market intervention, employee representation and defence of the vulnerable, that is proposed. She told delegates: “Where markets are dysfunctional, we should be prepared to intervene.

“Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by deliberately complex pricing structures, we must set the market right.”

May added: “It’s just not right that two-thirds of energy customers are stuck on the most expensive tariffs.”

This came after business and energy secretary Greg Clark said that

, in the wake of the £2 billion customer detriment reported by the Competition and Markets Authority (CMA), “it is our duty to act”.
Details of the planned government intervention are expected to emerge in the coming weeks and months, but there are rumours that they will seek to extend the price controls the CMA set out in its remedies.

This could put a stronger focus on protecting vulnerable consumers, and extending the reach of the safeguard tariff – which is currently set to be introduced for four million prepayment meter customers out to 2020.

Suppliers have been warned, and they are not pleased.

British Gas managing director Sarwjit Sambhi says the move is regressive and will hamper retailer innovation, such as the development of connected home devices like as Hive.

He says the CMA’s remedies should be allowed to bed in before any further intervention is made. “There is a lotof good stuff going on, we have to find a way of addressing the engagement issues and not stamping out innovation,” he says.

Other suppliers have expressed similar views, showing a unity not seen since the industry’s opposition to Ed Miliband’s proposed price freeze when he launched the policy idea back in 2013 (see box).

Which? managing director Alex Neill agrees with Sambhi, and calls on the government “not to meddle” in the sector until the CMA remedies have been introduced. She says further intervention could result in “unforeseen consequences” in the market.

However, she also warns suppliers that they are on their “last chance” to improve their offerings to customers.

CMA panellist Martin Cave would be among those welcoming the intervention, following his criticism of the CMA remedies that they “did not go far enough” and his calls for further, more drastic intervention.

It appears May and Clark are of the same school of thought, seeking to go further than the CMA in a bid to “make the market work for everyone”.

Remember the price freeze…

Theresa May’s statement that the government will intervene in the energy market is not the first time wider price controls have been proposed.

Three years ago, then-Labour Leader Ed Miliband unveiled plans to introduce a price freeze should his party win the 2015 general election, as part of a wider “resetting” of the energy market.

The plan was to introduce a six-month cap on prices while the sector was reformed and the vertically integrated companies broken up.

The move was slammed by rival politicians and energy companies as “simplistic”, shutting out investment in the sector. They said it would lead to “unsustainable loss-making retail businesses”.

The price freeze promise was scrapped after Labour lost the 2015 general election and Ed Miliband stood down as leader.