Tem­po­rary price cap on ‘rip-off’ en­ergy tar­iffs may last un­til 2023

Western Mail - - NEWS - Josie Clarke news­desk@waleson­line.co.uk

AN “AB­SO­LUTE cap” is to be im­posed on poor-value en­ergy tar­iffs, but only as a tem­po­rary mea­sure that will run un­til 2023 at the lat­est, the Gov­ern­ment has an­nounced.

In a state­ment ahead of draft leg­is­la­tion, the Depart­ment for Busi­ness, En­ergy and In­dus­trial Strat­egy (BEIS) said the cap would run ini­tially un­til the end of 2020, but would be kept un­der review with ex­ten­sions pos­si­ble un­til the end of 2023.

Ofgem will bring in a cap on stan­dard vari­able or other de­fault tar­iffs un­der the Draft Do­mes­tic Gas and Elec­tric­ity (Tar­iffs Cap) Bill to help more than 18 mil­lion cus­tomer ac­counts in Wales, Eng­land and Scot­land.

The Bill would re­quire Ofgem to con­sult and im­pose the cap “as soon as prac­ti­ca­ble” after the leg­is­la­tion is passed.

The BEIS Se­lect Com­mit­tee will be asked to scru­ti­nise the draft leg­is­la­tion to help build cross-party con­sen­sus on the work­ings of the cap as pro­posed in Prime Min­is­ter Theresa May’s speech last week.

The Gov­ern­ment said it had taken the step be­cause the en­ergy mar­ket “does not op­er­ate in the in­ter­ests of the ma­jor­ity of con­sumers”, adding: “While we are in favour of free mar­kets, we will al­ways take ac­tion to fix them when they’re bro­ken.”

The Com­pe­ti­tion and Mar­kets Au­thor­ity (CMA) found that cus­tomers of the Big Six en­ergy sup­pli­ers on stan­dard vari­able and de­fault tar­iffs are pay­ing £1.4bn a year more than they need to.

The draft Bill fol­lows Wed­nes­day’s an­nounce­ment by the en­ergy reg­u­la­tor that it is to ex­tend its pre­pay­ment price cap to one mil­lion more vul­ner­a­ble house­holds this win­ter, sav­ing them £120 a year, although it ad­mit­ted this would not take ef­fect un­til Fe­bru­ary.

The Gov­ern­ment said it wel­comed the ac­tion by Ofgem but be­lieved this could go fur­ther to pro­tect ev­ery­one on de­fault tar­iffs “from the un­fair prac­tices cur­rently seen in the mar­ket af­fect­ing two-thirds of house­holds in Great Bri­tain”.

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.”

Busi­ness and En­ergy Sec­re­tary Greg Clark said: “The en­ergy mar­ket is bro­ken. It pun­ishes loy­alty – the in­de­pen­dent com­pe­ti­tion au­thor­ity found mil­lions of peo­ple who are cus­tomers of the Big Six sup­pli­ers are over­pay­ing to the tune of £1.4bn a year. That is sim­ply wrong. While five mil­lion house­holds will see their bills capped from this win­ter, I want to see every house­hold pro­tected from rip-off bills.

“That is why we have pub­lished this draft leg­is­la­tion to­day – send­ing a clear mes­sage to sup­pli­ers they must act to put an end to loyal con­sumers be­ing treated so un­fairly.”

Will Hod­son, co-founder of col­lec­tive switch­ing or­gan­i­sa­tion The Big Deal, said: “This price cap is hugely wel­come. Big Six com­pa­nies have been over­charg­ing their most loyal cus­tomers for years and years.

“The tem­po­rary na­ture of the cap is fine for now but it’s im­por­tant that the Gov­ern­ment is will­ing to ex­tend the cap and even make it per­ma­nent if the Big Six com­pa­nies don’t mend their ways. The chal­lenge is now for sup­pli­ers, and switch­ing sites, to find new ways to pre­vent Bri­tish con­sumers from be­ing ripped off.”

Alex Neill, Which? man­ag­ing di­rec­tor of home prod­ucts and ser­vices, said: “For mil­lions of con­sumers wor­ried about their en­ergy bills, a cap might sound like a pos­i­tive move.

“How­ever, the Gov­ern­ment must guard against any un­in­tended con­se­quences that un­der­mine cus­tomer ser­vice and push up prices as a whole. As it will take some time to come into ef­fect, cus­tomers sit­ting on ex­pen­sive stan­dard vari­able tar­iffs should switch now.”

Richard Neudegg, head of reg­u­la­tion at uSwitch.com, said the Gov­ern­ment was “send­ing out com­pletely the wrong mes­sage” by sug­gest­ing that a price cap will im­prove the re­tail en­ergy mar­ket.

“The Gov­ern­ment can­not have it both ways. This in­ter­ven­tion will re­move the most ef­fec­tive weapon in keep­ing prices down – com­pe­ti­tion. In­stead it should fo­cus their ef­forts on widen­ing ac­cess to the Warm Home Dis­count for vul­ner­a­ble house­holds.”

The Gov­ern­ment re­jected the idea of a rel­a­tive cap, which would have set a limit on the dif­fer­ence be­tween a sup­plier’s cheap­est and most ex­pen­sive deals, in favour of an “ab­so­lute” al­ter­na­tive, which will work along the lines of the cap in­tro­duced in April to set prices for house­holds with pre­pay­ment me­ters.

Yui Mok

> The gov­ern­ment has an­nounced a cap on poor-value stan­dard vari­able or other de­fault tar­iffs

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