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| Price cap still possible, government warns energy companies | Price cap still possible, government warns energy companies |
| (21 days later) | |
| 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 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. | 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. | 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. |
| “It’s never been off the table, but Ofgem has the power to make the reforms and can move quicker than legislation. But we will legislate if it comes to it,” the source said. | “It’s never been off the table, but Ofgem has the power to make the reforms and can move quicker than legislation. But we will legislate if it comes to it,” the source said. |
| The business secretary, Greg Clark, wrote to Ofgem in June asking it to safeguard “customers on the poorest value tariff”, appearing to soften on a Conservative manifesto pledge to introduce a cap on standard variable tariffs used by 17m homes. | The business secretary, Greg Clark, wrote to Ofgem in June asking it to safeguard “customers on the poorest value tariff”, appearing to soften on a Conservative manifesto pledge to introduce a cap on standard variable tariffs used by 17m homes. |
| 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. | 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. | 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. | 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. | 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. | 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. | 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.” | “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. | 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. |
| However, ministers may face increasing belligerence from energy giants. On Tuesday Centrica’s chief executive, Iain Conn, blamed the government for the rise, saying the department should be “more open” about how its policies, such as a switch away from fossil fuels, were affecting prices. | However, ministers may face increasing belligerence from energy giants. On Tuesday Centrica’s chief executive, Iain Conn, blamed the government for the rise, saying the department should be “more open” about how its policies, such as a switch away from fossil fuels, were affecting prices. |
| “It’s a bit frustrating to end up always being blamed for it,” he said. Conn, who was awarded a pay rise of nearly 40% last year, taking his remuneration package to £4.15m, said the electricity price rise was the first since November 2013 and reflected a 16% rise in the cost of energy and delivery to customers’ homes since 2014. | “It’s a bit frustrating to end up always being blamed for it,” he said. Conn, who was awarded a pay rise of nearly 40% last year, taking his remuneration package to £4.15m, said the electricity price rise was the first since November 2013 and reflected a 16% rise in the cost of energy and delivery to customers’ homes since 2014. |
| Ministers denied any policy was to blame for the price rise and said wholesale prices were falling. “Government policy costs make up a relatively small proportion of household energy bills. Wholesale prices are the bigger portion of household bills and are coming down,” a department spokesman said. | Ministers denied any policy was to blame for the price rise and said wholesale prices were falling. “Government policy costs make up a relatively small proportion of household energy bills. Wholesale prices are the bigger portion of household bills and are coming down,” a department spokesman said. |
| Plans for the reform of energy markets, via price capping or bill freezes, were in the manifestos of all major parties, including Labour, the Conservatives and the SNP. | Plans for the reform of energy markets, via price capping or bill freezes, were in the manifestos of all major parties, including Labour, the Conservatives and the SNP. |
| John McDonnell, the shadow chancellor, called the price rise “extortionate” and said a price cap would ensure a “cartel” of energy companies could not “hold us over a barrel ever again”. | John McDonnell, the shadow chancellor, called the price rise “extortionate” and said a price cap would ensure a “cartel” of energy companies could not “hold us over a barrel ever again”. |
| The former Liberal Democrat leader Tim Farron said British Gas was taking for granted that many customers would not switch tariffs. “As a former public utility, British Gas has a huge number of customers who don’t switch, and is clearly treating these people like cash cows,” he said. | The former Liberal Democrat leader Tim Farron said British Gas was taking for granted that many customers would not switch tariffs. “As a former public utility, British Gas has a huge number of customers who don’t switch, and is clearly treating these people like cash cows,” he said. |
| Martin Lewis, the founder of the website MoneySavingExpert, said the move was a catch-up price rise from British Gas and echoed concerns that it could prompt another round of price rises from other energy companies this winter. | Martin Lewis, the founder of the website MoneySavingExpert, said the move was a catch-up price rise from British Gas and echoed concerns that it could prompt another round of price rises from other energy companies this winter. |
| Previous price freezes by British Gas had lulled customers into a “false sense of security that it wouldn’t move prices”, Lewis said, which meant consumers did nothing “when they could have cut their rate and locked that in for longer by actively picking a far cheaper one-year fixed energy tariff”. | Previous price freezes by British Gas had lulled customers into a “false sense of security that it wouldn’t move prices”, Lewis said, which meant consumers did nothing “when they could have cut their rate and locked that in for longer by actively picking a far cheaper one-year fixed energy tariff”. |
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