Energy companies have received a warning from the government that they could still legislate a price cap following British Gas’s announcement of a 12.5% increase in electricity prices.
The increase is not wholly unexpected, as it follows a succession of price rises by other energy companies in March. However, recent reports by experts in the field have shown a 13% decrease in wholesale prices in the UK since January. This has led many to label the price increase by British Gas as completely unjustifiable.
Millions of British Gas customers will be affected by the price increase that comes into effect on the 15th of September this year. There is due to be an estimated £76 increase to the average annual household bill. According to a source from the government, those from poorer households could be excluded from the price hike if Ofgem intervenes quickly on their behalf. The source also explained that an inadequate proposal by British Gas could lead to a government-authorised price cap.
The announcement has led to speculation of future price increases by other energy companies, especially those in the ‘Big Six’. John Penrose, an MP from the Conservative Party, warned of the consequences of Ofgem not taking immediate action against this increase. ”The market takes loyal customers for granted and it needs to be properly reformed. We have to work collectively across party to put the pressure on Ofgem”, he stated.
There has been pushback from within the energy companies themselves against the government’s recent comments. Last week, the CEO of Centrica, the company which owns British Gas, complained that the government was at fault for the price increases due to their own policies. He stated that energy companies just “end up always being blamed for it”. The government vehemently denies this, and a department spokesman emphasised that wholesale prices, which form the larger proportion of energy bills, have been in steady decline.
All the major government party manifestos included plans for improvements within the energy market, primarily through price caps. There has been widespread condemnation of the price rise across the parties with senior members of the government, including shadow chancellor John McDonnell, calling it “extortionate”. Former leader of the Liberal Democrat party Tim Farron has commented that British Gas is treating their customers like “cash cows” by taking their customer’s loyalty for granted and assuming that they will not switch due to the company’s previous position as a public utility.