May announces ban on energy prices ‘rip-off ’
Laws that compel energy companies to introduce an “absolute” cap on their prices in an effort to stop 18million households being “ripped off ” are being unveiled. However, Theresa May is facing a backlash from both the energy companies and from Conservative MPS as she rejected calls for a softer “relative” price cap, thought to have found favour with members opposed to interventions in the free markets.
ENERGY companies will be forced to introduce an “absolute” cap on prices under laws unveiled today to stop 18 million households from being “ripped off ”.
Theresa May will face a backlash from both energy companies and Tory MPS as she unveils draft legislation that will compel energy companies to limit prices.
The Daily Telegraph has learned that the Prime Minister has rejected calls for a softer “relative” price cap, which found favour with Tory MPS opposed to interventions in free markets.
Under the plans, Ofgem, the energy regulator, will introduce a strict limit for each region on the amount that companies can charge households for each unit of energy they use.
The Prime Minister said that the measures will help fix Britain’s “broken energy markets” and save “loyal customers” hundreds of pounds.
However, a former Tory minister last night warned that the approach will “throttle” competition.
The plans for an energy price cap formed the centrepiece of the Conservative Party’s manifesto but appeared to have been dropped after the Tories’ disastrous election campaign.
Mrs May announced her intention to resurrect the policy at the party’s conference last week, but did not disclose how the cap would work because it was considered “market sensitive”.
Nearly 80 Tory MPS wrote to the Prime Minister backing a “relative cap”, which would set a maximum mark-up between each company’s best energy deal and the standard tariff. The draft legislation will make clear that she will implement an “absolute” cap, which is seen by experts as a far tougher approach.
Mrs May said: “I have been clear that our broken energy market has to change – it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much. Today’s publication of draft legislation is a vital step towards fixing that and in offering crucial peace of mind for ordinary working families all over the country.”
‘An absolute cap would throttle competition and be out of date as soon as the wholesale price of gas alters’
Greg Clark, the Business and Energy Secretary, said: “The independent competition authority found millions of people who are customers of the ‘Big Six’ suppliers are overpaying to the tune of £1.4billion a year.
“That is wrong. While five million households will see their bills capped from this winter, I want to see every household protected from rip-off bills.”
However, John Penrose, a Tory MP and former minister, told The Daily Telegraph: “A temporary relative price cap puts the customer in charge, so energy firms compete to offer the best deals.
“An absolute cap would throttle competition, and be out of date as soon as the wholesale price of gas goes up or down.”
The legislation is unlikely to come into force for at least a year.