The government will take strong action to tackle rising gas and electricity bills because energy companies are milking disadvantaged people, the business secretary has said.
Greg Clark said Theresa May’s decision to call a surprise general election for 8 June meant events had intervened in his plans, which were expected to be announced as soon as next week.
“We will have to reflect on timing,” he said, but he rejected MPs’ charge that the government would delay its long-anticipated intervention in the energy market following the snap election announcement.
“There is no delay. The response you will see will be muscular and strong, and it will apply to all the companies that are disadvantaging consumers,” he told the business, energy and industrial strategy committee on Wednesday.
Clark said the plans, which are expected to include some form of price cap, would show “very decisive action”.
“Flagrant mistreatment” of loyal customers
Clark said he was acting because of the “flagrant mistreatment” of loyal customers who default on to more expensive standard tariffs and are collectively paying a billion pounds more than they need to.
“For consumers who aren’t able to be so active or so fleet of foot, they are being milked,” he said.
Clark’s comments mark the strongest language yet on the government’s plans to take regulatory action after May recently promised to step in against a market that was “manifestly not working”.
It remains unclear if the prime minister’s decision to call a general election will see the gas and electricity bills plans published before the dissolution of parliament on 3 May, or whether they will be held back as a manifesto pledge.
Analysts at Cornwall Energy said they believed the green paper would be shelved ahead of the election, but a Whitehall source said the possibility of action before the government and civil service shut down for the election campaign had not been ruled out.
Others said they expected the question of what to do about loyal energy customers paying over the odds to feature in the major parties’ election manifestos. Experts at Barclays said: “We believe it quite likely that most, if not all will announce measures to intervene in the domestic supply market in some way.”
An 18-month review by the competition watchdog last year ruled out a price cap, favouring measures to encourage consumers to switch more instead. Clark said the government’s response to the Competitions and Market Authority report was due very shortly.
Smaller companies question the need for price rises
One small supplier said, however, that it could not understand how suppliers could justify raising prices, especially twice in the case of EDF.
Bulb will reduce its single tariff by around 2.5% from Monday, becoming the only supplier to do so this year. The company said it had seen wholesale prices fall by 12% this year.
The trade body that represents energy suppliers stepped into the debate by calling on the government to make energy efficiency a national priority.
In a report on how to meet the UK’s 2030 carbon targets, Energy UK said ministers should fund a major insulation scheme through general taxation and encourage householders with grants, tax incentives and stamp duty rebates. Failure to act “could lead to upward pressure on energy bills”, it said.
The industry also called on the government to reconsider its 2015 manifesto pledge to block subsidies for onshore windfarms. Windfarms built on land require roughly half the level of subsidies for offshore ones, which consumers pay for through their gas and electricity bills.
A spokeswoman said: “Energy UK supports providing a route to market for all low-cost, well-established technologies, including onshore wind generation, to ensure power is delivered at the least cost to consumers.”
MPs also questioned Clark on how Brexit would affect the energy market
He said he was determined the UK would remain in the European energy market and increase the number of inter-connectors to the continent and Ireland despite leaving the EU. “It’s in no one’s interest at all to partition functioning markets,” he said.
He added that no decision had been made on whether to scrap targets under the EU’s renewable energy directive after Brexit, as recent reports had recently suggested the government would. Ministers also told the committee that further work was being undertaken on a long-delayed clean growth plan on how the UK will meet its future carbon targets.
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