The British Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, has called for the energy regulator Ofgem to use its power to impose an energy price cap, in spite of there being a risk of a legal challenge from some suppliers.
In response, Ofgem said it wanted to wait for the legislation to gain royal assent in order to mitigate the risk of a legal challenge from energy firms. Clark said he “would be very disappointed if there was a legal challenge from one of the energy companies.”
The government called on Ofgem to impose a price cap on the sector earlier this month, in what would be the biggest intervention in the energy sector since it was privatised 3 decades ago. Under the proposed bill, Ofgem would set the terms of the cap, which will last initially until 2020.
However, while being quizzed by MPs, Clark refused to commit to having the energy price cap, which will affect 11m households, in place by winter 2018. He warned that the government could not guarantee legislation would be passed in time, saying that the bill needs to be scrutinised by Parliament before it can begin the legislative process.
Speaking to a parliamentary committee, Clark said: “I would prefer Ofgem to make use of their powers so we could then get on with it immediately”. He refused, however, to comment further on the bill’s progress.
Britain’s energy market is dominated by the so-called Big Six energy suppliers, which have a 95% share of the market between them, leading to concerns that uncompetitive pricing leaves many consumers worse off.
Analysis by the Competition and Markets Authority (CMA) carried out last year found that British households had overpaid an average total of £1.4 billion a year from 2012 to 2015 because of such uncompetitive energy tariffs. The idea behind the proposed price cap is to eliminate excessive charging, whilst increasing levels of competition between the Big Six and smaller suppliers.
As outlined by the CMA, the Big Six’s dominance is entrenched by relatively stagnant number of customers switching supplier. Clarke himself also admitted he had still not switched his own energy supplier, despite an additional report this week that reinforcing the idea that customers who did not were being exploited by big energy firms.
“I haven’t switched. I’m clearly not a vulnerable consumer: I’m a busy consumer, I’m a typical consumer,” he said.
Clark insisted that, contrary to what one MP suggested, the government’s price cap would not end the rising trend in the number of people switching firms.