Politics Home: Concerns raised over “absolute limit” on prices rather than a relative energy price cap

The Prime Minister revived the party’s manifesto pledge to introduce an upper limit on charges last autumn, when she vowed to fix a system which “punishes loyalty with higher prices”.

But some number of Tory MPs have raised concerns that the introduction of an “absolute limit” on prices rather than a relative cap on the difference between a supplier’s most and least expensive deals could inadvertently punish consumers with higher prices.

The Times say those deemed more hostile to free-market intervention are set to draw up a number of amendments to the cap pledge, which is due to start its progress through the Commons today.

Should the move come into law it will be in place until 2020 when regulator Ofgem will recommend to ministers whether it should be extended up to 2023.

A number of MPs registered their objections in a letter co-ordinated by backbencher John Penrose in November.

The Weston-super-Mare MP said: “I’m absolutely delighted the Government is bringing in an energy price cap to protect over 16 million loyal customers on default tariffs from rip-off energy prices, exactly as I and others have been demanding for ages.”

He added however that the “rip-off” was the size of the gap between the highly competitive deals offered to consumers who regularly change supplier and the high default tariffs that loyal customers were secretly switched to.

He warned: “If the cap is set by a committee of regulators every six months, and wholesale prices fall, the gap… will get worse and because a price level has been officially blessed by the all-knowing Ofgem, it would embed and legitimise high prices.”

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