Ofgem will be handed powers to set a cap on standard variable tariffs (SVTs) if the Conservatives return to power following next month’s general election, prime minster Theresa May has pledged.
The Conservative Party, announcing its long-mooted price cap, has said the cap on SVTs would be set by the independent energy regulator.
The price regulation of the default tariffs would build on the price caps for customers with pre-payment meters, which was introduced in April.
Announcing the policy in a column in The Sun newspaper, May wrote: “If I am re-elected on June 8, I will take action to end this injustice by introducing a cap on unfair energy price rises.”
In an interview on the Today programme, business and energy secretary of state Greg Clark said the government would introduce legislation to equip Ofgem with the powers to cap SVT prices.
He defended the policy against criticisms that the Tories were rowing away from their traditional commitment to free markets by arguing that existing arrangements are not working for customers who are less able to switch suppliers.
“It’s right that those people should have some kind of safeguards,” he said
He also distinguished the Conservatives proposed cap from the freeze on energy bills mooted by Labour before the last election by arguing that the level would be determined by the regulator.
Branding Labour’s policy as “counter-productive”, he said: “These safeguards should be determined by the energy regulator and should not be done by politicians.”
Responding to the Conservatives’ announcement, shadow business secretary Rebecca Long-Bailey said the nature of the proposed cap meant that energy customers still potentially faced increases in their bills.
She said: “Just as when they announced it last time, there’s still no proper detail nor any real commitment to helping working people.
“When the Tories say they’ll ‘cap’ bills, the question they need to answer is whether they can guarantee bills won’t go up for people next year – that’s the real test. A cap suggests a maximum amount that can be charged, not a promise that bills won’t go up year on year.
And former Liberal Democrat energy and climate change secretary Ed Davey, who is seeking to return to the House of Commons at next month’s election, warned that the price cap would hit investment.
“It is never a good idea to copy the economic strategy of Ed Miliband. As the Conservatives pointed out at the time, this will damage investment in energy when it is needed more than ever,” said Davey.
“The reason the Conservatives feel forced into this now is because they have utterly failed to help people lower their bills by improving energy efficiency.”