John tells The Guardian: Standing up to the rip-off bills of the big six – affecting 20 million families – was a Tory policy that was always popular in the election. We must not water it down…
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Whatever the problems and criticisms levelled at the Conservative party’s election campaign, we got one thing absolutely right: the energy price cap. Wherever I went and whoever’s doorstep I was on, it was popular and it’s easy to see why.
Millions of us have been ripped off for years by the big six energy companies. Roughly two-thirds of all customers – that’s at least 20 million families – are on the expensive, rip-off “standard variable tariff”.
And while a minority of customers switch to a different energy supplier regularly, perhaps 90% of us don’t – either because we forget, are too busy, or simply don’t know how to do it.
The big six know this better than anyone. They exploit customer loyalty rather than rewarding it, by quietly switching us on to rip-off deals. Unless we do something about it, they’ll keep milking us for as long as they can.
The thing is, markets aren’t natural creations, like the laws of physics. They’re man-made. If we get the rules right, consumers and citizens are top dogs. But if we get them wrong, then prices go up, quality goes down, and either the shareholders or the bosses make out like bandits at our expense.
So how do we fix the energy market, so it works in favour of consumers and citizens instead?
First, we need to make switching simple, quick, easy and safe. There are some detailed, but vital, steps that would make it less stressful and not so scary. If you could change your energy supplier, or your contract, in a few seconds, with a click of a mouse or a tick of a box, the number of people switching would go through the roof.
But persuading us all to behave differently and to switch more will take time, probably years. And we can’t leave more than two-thirds of the country – that’s 20 million households – to carry on being ripped off while it happens.
All parties, including Labour and the DUP, agreed in their manifestos that we need an energy price cap to stop this sort of behaviour. The 30 or so challenger energy companies that are snapping at the big six agree, and have been clamouring for a relative price cap for some time. I think we should listen to them.
Simply put, the relative price cap is a maximum mark-up between each energy firm’s best deal, and their default tariff. It would mean that, once your existing deal comes to an end, if you forget to switch to a new one then you won’t be ripped off too badly.
Energy firms could still have as many tariffs as they wanted, so there would be plenty of customer choice, and competition would be red hot.
Crucially, it would be a lot better than an absolute price cap or freeze, which is what Ed Miliband originally proposed, because each energy firm could still adjust prices whenever it wanted, if the wholesale price of gas or electricity went up or down.
A month ago the argument was won, but over the past couple of days the big six have been stirring things up and are still trying to stitch up a deal to get the whole thing dropped. The very fact that they don’t like it, while their best challengers and competitors do, should tell us we’re on the right track.
Like millions of families, I’m fed up with rip-off energy prices. As the prime minister promised back in May: “If I am re-elected … I will take action to end this injustice by introducing a cap on unfair energy price rises.”
We’ve got re-elected. Let’s ignore the big six and deliver on our promises. Then we’ll have won a huge prize: an energy sector that behaves like a normal industry at last, where the customer is king – not the regulator or the politicians. And that would be an industry that is fair, that isn’t hated by its customers, and that can hold its head up high at last.