UK's Clark says energy price cap could start this winter

UK energy prices could be capped this winter with regulator Ofgem receiving legal backing from parliament, said Business Secretary Greg Clark.

The pledge to introduce a cap was a Conservative election manifesto pledge but failed to make it into the Tories' legislative programme after they took power in June. Prime Minister Theresa May renewed the promise during her speech to the party's annual conference on Wednesday.

Clark said “loyal” customers were being overcharged by £1.4bn a year, referring to the findings of a Competition and Markets Authority report which showed millions of people were moved onto more expensive standard variable tariffs (STVs) when their discount deals expired or failed to change due to inertia.

“A lot of people see themselves as loyal customers and because the companies know that they’re loyal … they are overcharging them. When you are faced with that evidence you’ve got a duty to act,” he told Sky News.

“Consumers who are suffering a detriment … could receive early relief for that.”

However, Iain Conn, chief executive of British Gas-owned Centrica, said an enforced cap would mean fewer cheap deals for consumers and cited examples of where similar schemes had not worked.

"In New Zealand, in Spain, in California and in Ontario they tend to limit choice, reduce competition and prices tend to bunch around the cap," he told the BBC.

"We've (also) seen this this year in the UK with the new pre-payment meter cap where most prices are within £2 of each other."

However, he did concede that the industry should shoulder some of the blame for the market's current failing.
Conn argued that STVs should be abolished instead of capped.

“Our message is wait, don’t go ahead with price caps, there’s a much better way of solving this market for the long run,” he said.