The energy sector and the country’s biggest business lobby group have reacted with horror to the Prime Minister’s pledge to cap “rip-off” energy prices.
Theresa May used her Conservative conference speech – overshadowed by a bad cough and the actions of a prankster – to say the Government planned to go carry out its earlier threat of action to fix, what she called, a broken market.
She had earlier called on the party faithful to “defend free and open markets with all our might”.
But the PM said: “We will always take on monopolies and vested interests when they are holding people back… 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.
Image: Theresa May needed plenty of water and a cough sweet to get her through the speech
“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.”
:: Energy bills: are standard tariffs a rip-off?
The pledge, warmly welcomed by consumer groups, was later tempered by a spokesperson who said the draft Bill would only be introduced if the regulator, Ofgem, failed to act.
A failure to switch means almost half of UK households still remain on standard variable tariffs (SVTs) – often the most expensive type of energy bill as customers default to them when fixed-cost deals expire.
Image: Shares in the parent firm of British Gas hit 14-year lows after the PM’s cap pledge
There are 12 million homes currently on SVTs.
The regulator has moved to bolster switching rates as part of industry reforms and the sector has since pointed to progress, with over three million consumers switching supplier or account this year.
Mrs May’s announcement was enough to send shares in Centrica – the parent firm of British Gas – down to 14-year lows on the FTSE 100 at one stage, closing 6.1% lower.
Fellow member of the so-called ‘big six’ SSE, also a constituent of the FTSE 100, saw its shares fall almost 3.2%.
The company said in response: “SSE will look carefully at what is proposed by government and detailed consultation is required to help avoid any unintended consequences.
“SSE believes in competition not caps, so if there is to be any intervention it should be simple to administer, time-limited, and maintain the principles of a competitive energy market to best serve customers’ interests.”
Two of the other biggest firms, E.ON and ScottishPower, have argued that standard tariffs are scrapped not capped.
The CBI’s director-general, Carolyn Fairbairn, said: “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.”