Price cap still possible, Government warns energy companies

The government has warned energy companies it is still prepared to legislate for an energy price cap, after British Gas announced a 12.5% electricity price rise for more than 3m households.

The increase would add £76 to a typical annual electricity bill, and some experts warned that it could kick start a new round of price rises from the so-called Big Six energy companies.

A senior government source said Ofgem had to act fast to safeguard poorer consumers and had the powers to do so – and repeated warnings that the government would be forced to legislate if the regulator’s proposals were inadequate.

The regulator held a summit last week with consumer groups on developing a “safeguard tariff” to extend an existing cap for the 4m households on prepayment meters to a further 2.6m poorer households who receive the warm home discount.

However, government sources suggested they would not accept any proposal from the regulator that rebranded standard tariffs rather than reformed them.

British Gas is the last of the Big Six to announce a price rise this year and the increase was widely expected because the energy giant had pledged to freeze prices until August after the other five companies announced rises in March.

However, UK wholesale prices have fallen by around 13% since January, according to analysis by energy and commodities monitor S&P Global Platts.

Centrica left its gas prices unchanged, which means the average annual dual fuel bill will rise by 7.3%, or £76, to £1,120, taking effect on 15 September. The company said it would give a £76 credit to more than 200,000 vulnerable customers to protect them from the increase.

Conservative MP John Penrose, who has led calls for a cap, said there was cross-party agreement on the need for a tougher approach. “The ball is in Ofgem’s court and they have necessary powers to impose a cap,” he said.

“What they are proposing is a narrow cap which does not help the 17m households who are on a standard tariff. They need the courage to act.”

He warned that unless concrete action was taken in the next 12 months, other companies were likely to announce further steep rises. “The market takes loyal customers for granted and it needs to be properly reformed. We have to work collectively across party to put the pressure on Ofgem,” he said.

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