Calls for ‘sunset clause’ as caps on energy bills loom

THE Government is being urged to introduce a time limit on price caps for energy bills, proposals for which are likely to be announced within a fortnight.

A plan from Tory MP John Penrose for a ‘ relative price cap’, where a default tariff is set that is never more than a certain percentage above a supplier’s cheapest deal, is regarded by industry and Government sources alike as the likely model for price caps.

In a submission to a Government consultation on the issue, seen by The Mail on Sunday, Penrose suggests the introduction of a relative price cap should be accompanied by a ‘sunset clause’ aimed at preventing the cap being permanent.

‘This proposal should only be a t emporary measure while t he more fundamental, long-term proconsumer initiatives are taking effect... the relative cap should be introduced with a “sunset clause”, so it comes to an automatic halt unless it is deliberately and explicitly renewed at the end of its predetermined life,’ he said in his submission.

Penrose wants to make switching suppliers permanently easier for consumers, including by making data on customers accessible to third parties, with their consent. When this is achieved the price cap could be removed, he proposed.

Government sources suggest that price caps will be introduced within a fortnight and before local authority elections on May 4, allowing the Government to gain political credit from the move.

Prime Minister Theresa May has repeatedly criticised the energy market, declaring last month that energy prices had risen by 158 per cent over 15 years, with the poorest homes hit by the highest tariffs.

EDF Energy caused renewed outrage last week when it hiked prices for the second time in four months. From June 21, EDF customers will see electricity prices increase by 9 per cent and gas prices by 5.5 per cent. It means 1.5 million EDF customers will pay 18 per cent more for electricity this year, with close to £100 added to annual bills.

It is one of the Big Six energy companies that dominate retail energy supply with about a 90 per cent share of the market. All have raised their prices this year, with the exception of British Gas, which has frozen its until August.

‘Price caps look inevitable and I can understand it up to a point,’ said Peter Atherton of Cornwall Energy. ‘We are in a period where prices are going to rise quite sharply, even if wholesale prices stabilise, because of the costs of Government policies.

‘But it is still hard to see how it is a good idea. Any price mechanism is open to manipulation and even a relative price cap would open the way for companies to manipulate their tariffs in a way which could see cheap offers dry up.’