Theresa May announces legislation to cap energy bills

Written by Liam Kirkaldy on 12 October 2017 in News

The UK Government legislation will allow watchdog Ofgem to impose price limits on standard variable gas and electricity tariffs

Theresa May - Image credit: Philip Toscano/PA Wire/Press Association Images

Theresa May has announced that draft legislation aimed at capping energy bills for around two thirds of consumers will be published later today.

The plans, which Business and Energy Secretary Greg Clark said would fix the “broken” energy market, would allow watchdog Ofgem to impose price limits on standard variable tariffs.

But the Prime Minister has faced criticism from backbench Tory MPs because she intends to impose an absolute rather than a "relative" cap.


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The Prime Minister has said she is in favour of free markets but has vowed to rein them in when certain sectors do not play fair.

“I have been clear that our broken energy market has to change – it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much,” she said in a statement.

“Today’s publication of draft legislation is a vital step towards fixing that, and in offering crucial peace of mind for ordinary working families all over the country.”

More than 18 million customers are currently on standard variable tariffs or other default tariffs – many of which see them paying more despite their loyalty.

The Competition and Markets Authority said thousands of customers of the Big Six energy suppliers were paying £1.4bn a year more than they needed to.

Clark said: “The energy market is broken. It punishes loyalty.

“That is simply wrong. While five million households will see their bills capped from this winter, I want to see every household protected from rip off bills.”

But The Telegraph says Tory MPs were hoping the Government would set a maximum mark-up between each company's best energy deal and the standard tariff, rather than an absolute cap.

Former minister John Penrose told the paper: "A temporary relative price cap puts the customer in charge, so energy firms compete to offer the best, most creative and attractive deals.

"An absolute cap would throttle competition, be out of date as soon as the wholesale price of gas goes up or down, and energy firms would spend more time lunching their regulators than delighting their customers."

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