Start-up warns price cap will not be the “right solution for the consumer”

One of the co-founders of a new energy company has called on politicians to focus their efforts on creating a regulatory framework, which encourages innovation, rather than “headline-grabbing price caps”.

Speaking to Utility Week, Andrew Ralston who is part of the team behind Pure Planet, said the idea of a price cap, which is being championed by both Labour and the Conservatives in the run up to the general election is “unhelpful” and “ultimately won’t end up as the right solution for the consumer”.

“The need for competition and innovation in the sector is un-questionable,” said Ralston.

“We think companies need to flourish in a free market. I think the idea of a price cap, whether it’s the Labour or the Tory version, is unnecessary. We are providing an average home with energy for under £900. The idea of capping it at £1,000 feels irrelevant.

“A couple of years ago, when [Ed] Miliband talked of imposing a price freeze, prices rose immediately in the fear of that. I think they should learn from that and let the market innovate and differentiate. If anything, they should focus on creating a regulatory environment to encourage that, rather than put headline-grabbing price caps in.”

Before launching Pure Planet, Ralston and the energy supplier’s other founders – Steven Day, Chris Alliott and Tom Alexander – also set up Virgin Mobile, and went on to run Orange, T-Mobile and create EE.

Pure Planet claims to be the first supplier to offer energy with no markup, coupled to a monthly membership and available via a smartphone app.

“We’ve looked at this through the eyes of the consumer, rather than through the legacy of utilities,” explained Ralston.

“There is a huge amount of suspicion and concern about how retail prices do or don’t follow the wholesale market,” he added.

“The general consensus is retail prices are very quick to rise when wholesale prices rise, but slow to fall when wholesale prices fall. There’s a lot of mystery about that.

“We thought the easiest way to dispel that is to say to members we make no margin on this product. As prices go up and down, our tariff tracks that wholesale market.”

“One of the true values we want to bring to bear is a sense of honesty, openness and transparency,” said Ralston.

“I think there is definitely a growing appetite for competition and independents. You can see that with the share the independent sector is taking from the Big Six. We’ve still got a long way to go, but we have a great trajectory. There have been a lot of independents who have come into the market over the last few years. We felt, if we were going to do this, we wanted to do it well and in a significant way.”