Following the Prime Minister’s recent pledge to put forward a price cap on standard variable energy tariffs, John Penrose, MP for Weston-Super-Mare in Somerset called for a relative cap rather than a fixed upper limit.
The relative cap would limit the differential between the highest and lowest chargeable price, creating a link between standard tariffs and the cheapest energy deals. This would be a less ‘interventionist’ step compared to introducing an absolute cap, and therefore less uncomfortable for Conservatives who – traditionally and ideologically – support free market policies.
Mr Penrose MP said:
“We need to make the energy market more competitive, so the customer is king and big business fat cats can’t take us for granted. The only way to do this – without distorting the market – is by imposing a temporary relative price cap to protect all customers who forget to switch at the end of their contracts.
It would limit the maximum mark-up the big six could impose so competition would be red-hot and the rip-offs would stop.”
Consumer organisation Which urged the Prime Minister to step in after energy companies started hiking their prices in April, as fixed-price tariffs for gas and electricity came to an end. During the months April – June 2017, 70 fixed-tariffs will end, and if householders do not look actively for better energy deals, they will be switched to the expensive standard variable tariffs during this quarter. It is estimated that the average price increase for a household in the South West could be just under £100, where the average of savings to be made from switching is believed to be in the region of £386.