Prime Minister and Conservative party leader, Theresa May, has today confirmed long-expected plans to introduce an energy price cap if she’s re-elected on 8 June.
The cap will apply to standard variable tariffs and be set by energy regulator Ofgem. Mrs May expects it to protect around 17 million families and to save households “as much as £100”.
In a statement released today she says: “Like millions of working families, I am fed up with rip-off energy prices.
“Gas and electricity bills only ever seem to go in one direction, eating up more and more of your monthly pay packet.
“In recent months we have seen five of the Big Six energy firms announce yet more price rises for standard tariffs – while analysis shows profit margins hitting record levels.
“That is despite the fact a Government-backed report last year found households are already paying £1.4 billion a year more than they need to.
“So I am making this promise: if I am re-elected on 8 June, I will take action to end this injustice by introducing a cap on unfair energy price rises.”
When Moneywise asked Ofgem for more details on how the cap might be calculated, it said it couldn’t comment on election proposals.
‘Still no proper detail nor any real commitment’
In response to the pledge, Rebecca Long-Bailey, Labour’s shadow secretary for Business, Energy and Industrial Strategy, says: “This is desperate stuff from the Tories, re-announcing something they tried to get a headline for just a fortnight ago. But just as when they announced it last time, there’s still no proper detail nor any real commitment to helping working people.
“When the Tories say they’ll ‘cap’ bills, the question they need to answer is whether they can guarantee bills won’t go up for people next year – that’s the real test. A cap suggests a maximum amount that can be charged, not a promise that bills won’t go up year on year."
Former Labour leader, Ed Miliband, had promised to freeze energy prices for 20 months after the 2015 general election if they won power (which they didn’t).
The Liberal Democrats had yet to respond to the Conservative’s energy price cap pledge at the time of writing.
‘Energy price cap would be a disaster’
Experts at energy price comparison websites have voiced concerns that a price cap will be a “disaster” as it will damage competition. However, comparison websites will have an ulterior motive for wanting people to switch.
Stephen Murray, energy expert at price comparison website MoneySuperMarket, says: “For customers who have the ability to switch – the majority outside the most vulnerable – an energy price cap would be a disaster… it will lead to many of the best deals disappearing, prices finding a higher level and a growing market of disengaged customers.
“Instead of bringing in a price cap, the Government should spend some money raising awareness of switching and leave the mechanics of an increasingly vibrant and competitive market well alone.”
Richard Neudegg, head of regulation at price comparison website uSwitch.com, says: “Energy bills are too high for many customers, but the suggestion that a price cap will fix the market is a red herring. Today’s pledge will ultimately kill competition, push up energy prices and leave consumers worse off.”
Meanwhile Alex Neill, managing director of home products and services at consumer group Which?, says: “Measures that significantly reduce the cost of your bills overnight will be welcomed, but this cannot result in an increase in bills overall, undermine improvements in service or bring much needed innovation to a halt.
“Tackling this broken market so that it works for everyone must be the priority for the next Government.”