Following a spate of price hikes from big six energy suppliers, the government has announced that they will be taking “muscular” action to protect consumers.
At the Conservative part conference in Cardiff back in March, Theresa May gave a speech arguing that the energy market is “manifestly not working for customers”, and that recent attempts to improve the situation have been ineffective.
She complained that energy prices have, on average, increased by more than 150% since 2001 and that “the vast majority of customers, especially those with the lowest incomes, are on the most expensive tariffs”.
Now, energy secretary Greg Clark has spoke out once more, reaffirming his commitment to taking action against overcharging.
Five of the big six energy suppliers (all bar British Gas) have raised their prices this year, despite prior objections from Ofgem. The energy regulator had warned that any suppliers intending to raise their prices would have to justify doing so beyond citing rising wholesale costs, which suppliers protect themselves against by buying energy years in advance. Earlier this month, EDF went a step further by announcing their second price hike of the year, due to come into effect in June.
These successive price hikes have brought to the fore more discussion about possible price caps for standard variable tariffs. Within the industry there is, unsurprisingly, little support for price caps.
Iain Conn, CEO of Centrica, which owns British Gas, told the Financial Times that implementation of a price cap would ultimately harm consumers by reducing competition. Regulation, he said, would price some suppliers out of the market, and discourage others by making the market “less attractive”. The head of SSE made similar arguments.
However, within consumer groups, there is more support. Citizens Advice’s Richard Hall said: “Standard variable tariffs could be capped at a level that still allows them to be profitable for suppliers, but that is fairer on loyal customers.”
And Ofgem have said that should ministers support the decision, they would have the power to implement a cap, although last year’s CMA investigation came to the conclusion that it would not be necessary.
The government have not yet said what action they intend to take, but Greg Clark has made it abundantly clear that he intends to do something. The recent snap call for a general election has caused him to “reflect on timing” he said, but not to delay proceedings.
“The response you will see,” he said, “will be muscular and strong, and it will apply to all the companies that are disadvantaging consumers.”