The Prime Minister is facing a backlash from the energy sector and the country’s biggest business lobby group following her pledge to cap “rip-off” bills.
Theresa May used her Conservative conference speech – overshadowed by a bad cough and a comedian’s stunt – to say the Government planned to carry out its earlier threat of action to fix the “broken energy market”.
She had earlier called on the party faithful to “defend free and open markets with all our might”.
But the PM said: “We will always take on monopolies and vested interests when they are holding people back… the energy market punishes loyalty with higher prices and the most loyal customers are often those with lower incomes – the elderly, people with lower qualifications and people who rent their homes.
“Those who, for whatever reason, are unable to find the time to shop around.
“That’s why next week this Government will publish a draft bill to put a price cap on energy bills, meeting our manifesto promise and bringing an end to rip-off energy prices once and for all.”
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The pledge, warmly welcomed by consumer groups, was later tempered by a spokesperson who said the draft bill would only be introduced if the industry’s regulator, Ofgem, failed to act.
A failure to switch means almost half of UK households still remain on standard variable tariffs (SVTs) – often the most expensive type of energy bill as customers default to them when fixed-cost deals expire.
There are 12 million homes currently on SVTs.
The regulator has moved to improve switching rates as part of industry reforms – with more than three million consumers switching their supplier or account last year.
But critics have accused it of only giving help on the cost of bills to vulnerable customers.
An Ofgem spokesman said: “We share the Government’s concern that the market is not working for all consumers, especially the vulnerable, and will work with the Government on their plans announced today to better protect consumers on poor value deals.”
Mrs May’s announcement was enough to send shares in Centrica – the parent company of British Gas – down to 14-year lows on the FTSE 100 at one stage, closing 6.1% lower.
Image: Shares in the parent firm of British Gas hit 14-year lows after the PM’s pledge
Fellow member of the so-called “Big Six” SSE – also a constituent of the FTSE 100 – saw its shares fall by more than 3%.
The company said in response: “SSE will look carefully at what is proposed by Government and detailed consultation is required to help avoid any unintended consequences.
“SSE believes in competition not caps, so if there is to be any intervention it should be simple to administer, time-limited, and maintain the principles of a competitive energy market to best serve customers’ interests.”
Two of the other biggest firms, E.ON and ScottishPower, have argued that standard tariffs should be scrapped, not capped.
The CBI’s director-general, Carolyn Fairbairn, said: “Today’s announcement is an example of state intervention that misses the mark.
“Market-wide price caps are not the best answer. Suppliers are already acting, providing support to those on pre-payment meters, and continued action to phase out standard variable tariffs would benefit a wide range of consumers, including those on the lowest incomes.”