There have been mixed reactions to Prime Minister Theresa May’s pledge to introduce a draft bill next week to put a cap on energy bills.
Trade body Energy UK believes it is important growth of competition and market engagement is not halted.
Chief Executive Lawrence Slade said: “One of the major contributors to high energy bills, especially over winter months, is the poor quality of our housing stock. As ministers have highlighted earlier this week, energy efficiency measures have helped to keep bills down – to around the same level we were paying nearly a decade ago.
“Making out homes energy efficient would be the most effective way of reducing bills for customers over the long term – which is why we are calling for the government to make it a fully-funded national infrastructure priority.”
“Competition, not caps”
A spokesperson from Big Six supplier SSE said: “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.”
It “won’t improve retail energy market”
Richard Neudegg, Head of Regulation at price comparison site uSwitch said: “All the evidence from previous interventions like this shows that it does not lead to long term improvements for consumers.
“The government should instead push suppliers to proactively get their customers off expensive standard tariffs and set targets to encourage more customers to make a choice about their energy deal. A price cap condemns energy customers to more of the same – it lets suppliers off the hook by encouraging consumers to stay put instead of voting with their feet.”
Price cap “big step” towards lower bills
Small energy supplier Bulb, however, believes it will help people save money on their bills.
Co-founder Hayden Wood said: “Not all energy companies support this but we think it’s a big step in the right direction. It should make the market much more competitive because it will stop big incumbent suppliers from charging extortionate rates to the large number of customers that they inherited after privatisation. This measure will force them to start competing on their own merits.”
“May must deliver”
Collective switching service The Big Deal added the price cap will protect millions of families from “unscrupulous Big Six practices and price rises”.
Co-founder Will Hodson said: “A shocking eight million households have been on the Big Six’s worst tariff for three years being overcharged hundreds of pounds every year… But Theresa May said in her manifesto that she would deliver a price cap and then watered it down. This time she must deliver.”
“Price cap done wrong can do more harm than good”
Martin Lewis, founder of MoneySavingExpert and Cheap Energy Club added: “Some in the Tories have called for a ‘relative’ price cap – which means a firm’s most expensive price can only be a set percentage more than the cheapest. That’s self-defeating – it means they’ll just withdraw cheap deals.
“Politicians have to decide, do they see competition and switching as the solution or do they want to regulate prices? For switching to work you need big price differentials – so some will have to pay more than others.
“As the Tories want switching, what they need to do is decide who should be in a competitive market and who [shouldn’t]- and protect those who can’t rather than won’t engage. As that’s difficult, any cap should simply be a set ceiling on rates, much like has been implemented in the prepayment market.”
There were also mixed views on the energy price cap proposal at the Conservative Party Conference prior to the announcement.