The Government has today published the long awaited energy cap bill.
The bill comes further to John Penrose’s letter to the PM which was signed by 213 MPs last Autumn just before her conference speech announcement that a bill would be forthcoming.
John said: “I’m absolutely delighted the Government is bringing in an energy price cap to protect 17 million loyal customers on default tariffs from rip-off energy prices, exactly as I and others have been demanding for ages. This is a great day.
“But we can’t rest on our laurels. The details matter too, otherwise we might magnify rather than solve problems.
“If the cap is set by a committee of regulators every 6 months, and wholesale prices fall, the rip-off will get worse and we will have brought in a bizarre law that embeds and legitimises rip-off prices.
“If we instead design a cap which shadows the really competitive part of the market that already gives switching customers great deals, we will be protecting loyal customers from rip-offs no matter what happens to wholesale energy prices in future.
“When loyal customers get the best deals, rather than the worst rip-offs, this battle will finally be won.”
The two parts of the energy market
the ultra-competitive part which serves up great-value deals for customers who switch every year (10% of us), where prices move around every day; and the ultra-uncompetitive part which takes the non-switchers (“loyal customers” – those stuck on the default tariff that you get put onto if you forget to do the admin – 17 million of us) for granted.
What is the “rip-off”?
The difference between the price offered by each of these two parts of the energy market.
The Big 6 energy companies reel customers in with tasty deals and then when they’re not looking, secretly move them onto the very high tariffs.
Why will a cap set by Ofgem’s committee of regulators embed and legitimise rip-off prices?
If wholesale prices fall (they change every day), prices for switchers will fall as the competitive part of the market reacts to the news.
Capped prices for loyal customers on default tariffs won’t – so the gap, the rip-off, will get bigger. High prices will become the norm – exactly as we’ve seen with university tuition fees.
Surely in this situation the Big 6 are still free to offer lower prices than the cap to their loyal customers on default tariffs?
Their track record shows this isn’t remotely foreseeable – otherwise we wouldn’t need the bill in the first place.
A number of MPs and energy companies agree with John Penrose
They all signed John’s submission of 29th November to the BEIS Committee’s pre-legislative scrutiny of the bill, making exactly these points.
Here are the signatories:
John Penrose MP
Patricia Gibson MP
Caroline Lucas MP
Sir Oliver Letwin MP
Rt Hon Stephen Crabb MP
Rt Hon Dame Caroline Spelman MP
Rt Hon Ben Bradshaw MP
Neil Parish MP
Nigel Evans MP
Richard Graham MP
Scott Mann MP
Alex Chalk MP
Tim Loughton MP
Fiona Bruce MP
John Howell MP
Gordon Henderson MP
Maria Caulfield MP
Simon Clarke MP
Catherine West MP
Andrew Lewer MP
William Wragg MP
Sheryll Murray MP
Robert Halfon MP
Greg Jackson, Octopus Energy
Bill Bullen, Utilita
Joanne Thornton, Green Star Energy
Phil Levermore, Ebico
Chris Bowden, Squeaky Clean Energy Limited
Simon Oscroft, So Energy
Adrian Leaker, PFP Energy
Keith Bastian, Fischer Energy