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Conservatives pledge to cap energy bills

energy bills

According to the Sunday Times the plans could cut gas and electricity costs by £100 a year for 17 million families, according to the Conservative Manifesto

A cap on household energy bills is set to be included in the Conservative manifesto, a cabinet minister has said.

According to the Sunday Times the plans could cut gas and electricity costs by £100 a year for 17 million families.

Work and Pensions Secretary Damian Green told ITV people felt “taken advantage of” by energy firms.

Labour said the plan should be taken with “a pinch of salt”, while price comparison company uSwitch said it would “do more harm than good”.
The wider energy industry has reacted with scepticism to the plan, saying a price cap could have a negative impact on competition and lead to higher prices.

Manifesto pledges take shape

The manifesto pledge would outline plans to cap bills for seven out of 10 households paying standard variable tariffs, which are often criticised as bad deals for consumers by industry watchdogs.

It follows the introduction of a cap for households using pre-payment meters early this month, after the Competition and Markets Authority released a report saying customers were overpaying by £1.4bn.

Mr Green told the Peston on Sunday programme: “There will be a lot about energy policy in the manifesto [and] obviously there will be more detail.

“But… I think that people feel that some of the big energy companies have taken advantage of them with the tariffs they have got.”

Mr Green said his party’s promise on energy bills was not the same as Labour’s 2015 election pledge to freeze gas and electricity bills for every home and business in the UK for 20 months.

“But Scottish Power, one of the “Big Six” energy firms, told the BBC that the move would “stop competition” and “damage customers in the long run”.

Shares in energy firms were hit by the proposed price cap.
British Gas owner Centrica closed down 3.5% and SSE fell 1.9%, although both stocks had been lower earlier in the day.

Labour said the proposal should be taken with “a pinch of salt”, adding that energy bills had “soared” under a Conservative government.

Energy companies react

The energy industry has reacted with scepticism to the plan, saying it could lead to higher prices.

Speaking to the BBC, Scottish Power’s chief corporate officer, Keith Anderson, said: “If you put a cap on prices, you actually stop competition. That’s the danger of price intervention.”

When companies do not compete as much, that tends to lead to fewer benefits for customers, he said.

He added that if the Conservatives did intervene, it would be better if they abolished standard variable tariffs.

Defence Secretary Sir Michael Fallon defended the Conservative’s intention to impose a cap on energy prices.

“We wanted to see more competition, we wanted to see more people able to switch between energy users,” Sir Michael told the BBC.

“That over the last three or four years has not happened. This is a market that is not working perfectly and therefore we are intervening to make markets work better,” he added.

Co-leader of the Green Party Jonathan Bartley said the policy did not go far enough and he wanted more local choices of supplier for consumers.

But trade association body Energy UK said a cap could risk “billions in investment and jobs”.

British Gas parent firm Centrica and fellow supplier E.On have both said market competition is essential.

Conclusion: energy bills are almost certainly going to continue rising prices. Whilst this will help with cheaper energy bills for some consumers, the only way to guarantee cheaper prices is to switch suppliers

This is where we can help. A growing number of companies are realising that consumers are becoming more informed, and more willing to switch tariffs. In turn, this is leading to increased competition and cheaper prices. It’s likely that as this trend continues, some really good fixed-term deals will start appearing.

With AIswitch, we change your tariff as soon as a better deal comes available. You don’t need to do anything: we will change you to the new provider or tariff automatically.