With a cap on energy bills set to be included in the Conservative manifesto, the energy industry have reacted with scepticism of the proposal, declaring that the move would be more damaging to customers in the long term.
The proposal is said to be different from Ed Miliband’s 2015 election pledge, whereby he intended to freeze bills, instead with Ofwat setting limits that would reflect market conditions, and with the market still having an influence.
Energy’s “Big Six” have alleged that capping bills would almost certainly end competition, with fewer people switching suppliers because it would no longer be seen as necessary.
It is widely agreed that switching energy supplier is key to increasing competition and decreasing energy prices. Last year a record 7.7 million people changed their energy supplier, however 56% of households have still never switched.
Full details of the pledge are not yet known, but it is thought the cap would be on standard variable rates, considered the most extortionate tariffs available. In December 2016, Ofgem reported that roughly 66% of consumers are on standard variable rates, paying an average of £141 more a year than if they were on the cheapest deal.
Just earlier this month, market watchdog Ofwat imposed a price cap for households using pre-payment meters. This was prompted by a report from the Competition and Markets Authority which found that customers are overpaying by approximately £1.4 billion.