Britain's Business secretary says energy market is inefficient

Lucy Bush
May 10, 2017

Energy bills have doubled in Britain over the past decade to about 1,200 pounds ($1,500) a year, putting the biggest providers in the sights of politicians and voters who are already battling rising inflation and limited wage growth.

"The key thing is that people are clearly paying too much for their energy bills today".

Similarly, figures released by comparison site energyhelpline in August last year, showed a third of United Kingdom households, which have not switched their energy suppliers over the past five years, have spent £18.7bn ($24bn) more than they should have had.

Customers could save more than £300 by leaving costly standard variable tariffs, usually by moving to a fixed-term tariff, regulator Ofgem said. A separate CMA probe found competition among prepayment meter suppliers is less developed than for those who pay their energy bills every month, meaning customers have fewer tariffs available to choose from and the existing tariffs tend to be more expensive.

Mrs May has said that the cap should save the 17 million households on standard tariffs up to £100 a year.

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But it is nearly identical to a Labour policy from 2015 which was - at the time - slammed by the Tories as a quasi-Marxist state intervention.

German-owned E.ON also expressed alarm at the prospect of price caps, as the company reported profits being down by a third for the first quarter of the year.

"I think it's right, as does everyone sitting around the Cabinet table, for government to take action to support working families", said the Prime Minister.

Experts at energy price comparison websites have voiced concerns that a price cap will be a "disaster" as it will damage competition. These more passive consumers remain on standard tariffs with one of the "Big Six" energy suppliers, including 80 per cent of Britain's elderly, disabled and low income households.

However, she said she could not promise that her planned cap would guarantee prices do not go up "year on year" but said it would prevent "sudden and unexpected and significant" jumps in the price of gas and electricity.

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"The only way to do this - without distorting the market - is by imposing a temporary relative price cap to protect all customers who forget to switch at the end of their contracts".

The firm, the only one of the "Big Six" that did not hike prices, lost 261,000 customers to competitors in the first quarter of 2017, on top of the 400,000 customers British Gas lost a year ago. That would imply that if wholesale prices continue creeping up, as they have in Ofgem's cost supplier index, bills will go up despite the cap.

"Under Theresa May's strong and stable leadership, we will act on our commitment to intervene when the energy market fails to treat people in a fair and reasonable manner".

Shares in energy companies Centrica and SSE have tumbled after Theresa May vowed to cap "unfair" energy bills.

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