A price cap won't improve the energy market

10 May 2017, 03:24 | Isaac Mcdaniel

A price cap won't improve the energy market

A price cap won't improve the energy market

Theresa May has announced plans to cap standard variable tariffs in the new Tory manifesto after acknowledging that vulnerable people can be affected by the "rip-off bills".

"But the real problem with this, as with Ed Miliband's proposal for a energy freeze in the 2015 General Election, is that the energy system remains in the hands of the corporations and therefore is operated in their interest, not for people or for sustainability".

The major intervention has been trailed for six months since Theresa May spoke out against the Big Six energy companies during her first speech to the Conservative conference as prime minister.

Business Secretary Greg Clark told Sky News: "The independent competition authority made an investigation into the energy markets and they found consumers were overpaying by £1.4bn a year - that's ranged in the past from £70 to £200 a year on people's bills".

The Liberal Democrats' Ed Davey said: "It is never a good idea to copy the economic strategy of Ed Miliband".

Justifying the move, the Conservatives pointed to a report previous year by the Competition and Markets Authority (CMA) which found 70% of domestic customers of the "Big Six" energy companies were on SVTs.

The group also cautioned that millions of consumers who had engaged in the market could see their bills rise "significantly", as suppliers hiked up prices on their better-value fixed deals.

Has Mr Miliband had anything to say about Mrs May's announcement?

GETTYHomes can save £300 with the best energy deals
GETTYHomes can save £300 with the best energy deals

"Evidence from other countries would suggest this will lead to reduced competition and choice, and potentially higher average prices", it said. However, Conn said Centrica's United Kingdom energy supply business makes up only a quarter of its operating cashflow.

"Further intervention risks undermining so numerous positive changes we are seeing in the market which are delivering benefits for consumers".

"With a cap it would be very hard for the "Big Six" to generate the kind of profits they have been able to".

SSE said the market was competitive, dynamic and fast changing, while Scottish Power said May's party had come to the wrong conclusion and that standard tariffs should be scrapped altogether.

Tories say the price limit could save 17 million families £100 a year, but energy bosses warned the Tory price cap could undermine competition. With the Conservatives nearly certain to win a majority, it's highly likely the pledge will be carried out.

According to data released by the Competition and Markets Authority (CMA) previous year, 70% of customers of Britain's "Big Six" energy providers - British Gas owner Centrica, SSE, E.ON, EDF, Scottish Power and nPower - have failed to switch from the highest standard variable tariffs. "Well, I can take a consumer onto a price competition website today and I could save them much, much more than that", he said.

"This policy from the Conservatives, just as the policy from Ed Miliband, will not work".

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