Tariff loophole may drive up energy prices

ENERGY companies may try to “game” government plans for a price cap by taking advantage of an exemption on green tariffs, the head of Ofgem has warned MPS.

Dermot Nolan admitted there was a loophole in plans to stop families being hit with big energy bills because companies could put them on a so-called green tariff and avoid the cap.

The admission drew ire from MPS who warned the regulator had to curb bad practice and boost competition in the energy market.

It came as Mr Nolan apologised to MPS for not moving quickly enough to help vulnerable consumers.

Rachel Reeves, chairman of the Business, Energy and Industrial Strategy Committee, said Mr Nolan and Ofgem were being “passive” and failed to stop energy giants ripping people off.

Mr Nolan admitted that companies could “play the system” unless laws were tightened. “We think it likely that suppliers may try to game it in some sort of fashion in the sense that we could imagine a larger supplier offering a tariff above the price cap that was green,” he said.

Although there is a green energy test, it is “imperfect”, Mr Nolan said, but Ofgem will police the market “intensively” and impose punitive fines on companies exploiting the loophole.

Plans for a universal price cap were announced in the Conservative manifesto last year, but, frustrated by the regulator’s inaction, the Prime Minister announced legislation to rein in “rip-off ” bills in her speech to the Tory party conference in October.