Theresa May plans to cap the prices of energy tariffs for around 12 million people, offering savings of up to £100 per year.
The prime mister has promised to bring back a promise that was proposed in the Conservative manifesto, but was thought to be scrapped when there was no mention of it in the Queen’s speech in June.
May attacked the leading energy providers, claiming that the system in place now “punishes loyalty with higher prices”, greatly affecting those on low incomes as well as the elderly and those with low qualifications. The government plans to unveil a draft bill in October that outlines new powers being offered to Ofgem to bring about new price caps.
Business secretary Greg Clark commented that Ofgem currently had the powers to do this, but to act without legislation allowed for energy companies to appeal any caps. May said: “While we are in favour of free markets we will always take action to fix them when they are broken. We will always take on monopolies and vested interests when they are holding people back.
“One of the greatest examples in Britain today is the broken energy market. The energy market punishes loyalty with higher prices and the most loyal customers are often those with lower incomes, the elderly, people with lower qualifications and people who rent their homes.
“Those who, for whatever reason, are unable to find the time to shop around.
“That’s why next week this government will publish a draft bill to put a price cap on energy bills, meeting our manifesto promise and bringing an end to rip-off energy prices once and for all.”
The cap has the support of nearly 80 Tory MPs who signed a cross-party letter prior to the conference to the PM in with the idea of bringing back the policy.
The speech had an impact on the stock market: Centrica who own British Gas and are Britain’s largest energy provider found their stocks fall to a 14 year low. SSE and Scottish power also saw their stocks decrease in value, SSE claiming that any cap to prices should be “time limited” and “maintain the principles of a competitive energy market to best serve customers interests”.
Scottish power spoke against the cap, claiming that it would “not encourage more customers to participate in the energy market”.
Energy providers were not the only bodies critical of the new promise. The labour party has attacked the clarity of the proposal, saying it was left ambiguous “when and how” such legislation would be put into place.
The Confederation of British Industry also spoke against the government’s latest move. CBI director general Carolyn Fairburn said “Affordable energy matters for everyone and particularly for the most vulnerable.
“However, today’s announcement is an example of state intervention that misses the mark. Market-wide price caps are not the best answer.
“Suppliers are already acting, providing support to those on pre-payment meters, and continued action to phase out standard variable tariffs would benefit a wide range of consumers, including those on the lowest incomes.”
There were however those in support of the new proposal, First Utility’s chief commercial officer Ed Kamm said: “We support Theresa May’s commitment to tackle the broken energy market and the exploitation by the Big Six, which disproportionately affects vulnerable customers.
“The majority of consumers pay far too much for energy and many have been doing so for decades. Time has finally been called on the Big Six’s behaviour.”