May’s pledge on “rip-off” energy prices keeps UK in dark over cap on bills

5th October 2017 | Residential Energy

Theresa May’s pledge to cap “rip-off” energy prices is about as clear as the average electricity and gas bill. The prime minister promised to introduce a draft bill next week to give the energy regulator, Ofgem, powers to cap the bills of people being “punished” for their loyalty and their inability to shop around.

But the Conservatives later admitted that they were only giving Ofgem the powers to impose a cap for everyone on a standard variable tariff, not actually ordering the regulator to impose it.

Ofgem had been expected to announce a much narrower cap this week, for two million vulnerable households, to take effect in January, and the energy companies had reluctantly accepted that.

But now the Tories say that if Ofgem’s plan does not go far enough, the new powers would allow it to “go further”, ie implement a cap on 15 million households not two million. It’s not clear what criteria would be used to judge what “far enough” is.

Energy Prices

Technically, Ofgem already has the power to implement such a cap now, but it would be open to challenges by energy suppliers. Legislation should head off that risk. In a statement, the regulator said, “We share the government’s concern that the market is not working for all consumers, especially the vulnerable, and will work with the government on their plans announce today to better protect consumers on poor value deals.”

But Ofgem was unable to say whether its cap for two million households would still go ahead in January, saying it was reviewing plans after May’s Conservative party conference speech.

This lack of clarity means the prospect of a cap coming soon enough to help people head and light their homes this winter seems unlikely. The energy industry has privately warned it will fight a wide-ranging cap and suggested such a plan would take at least a year to implement.

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