Home Former energy regulators suggest price capping would be counterproductive

Former energy regulators suggest price capping would be counterproductive

Press Release: April 21, 2017

According to the latest buzz, energy experts have suggested the government to not intervene in the energy market and announce price caps. As per a group of five former energy regulators, this kind of an intervention may not be the best idea and more importantly it may have a negative impact on the energy market. This is especially the case when the government plans on imposing price controls for standard energy tariffs customers. As these customers do not choose to go for energy price comparison and pay for the most expensive home energy plans, it becomes important to stop their further exploitation.

Prime Minister Theresa May was even quoted saying that the energy market was "manifestly not working for all consumers" and Ofgem echoed her words by saying that the Big Six have no reason to raise gas and electricity prices and strict action would be taken against suppliers that do not offer cheaper energy prices to its customers. However, the former energy regulators have pointed out that such measures taken in the past had not given positive results. They said that "Regulatory interventions have been counterproductive andthe temptation to intervene further should be resisted".

The group even raised doubts on the results of the CMAs two year research which states that the larger energy firms are making extra gains of £1bn to £2bn a year. They argued that this is a mere estimation of the kind of profits big energy companies can make when they are the most efficient. They also added that price capping would result in considerable losses for the entire energy sector and may not be the best solution for offering cheaper energy deals to customers.

The group of former regulators consisting of Prof Stephen Littlechild, Sir Callum McCarthy, Eileen Marshall, Clare Spottiswoode and Stephen Smith said that "Retail energy profits are not excessive, loyal customers are not being ripped off, and there is no need to pressure consumers to be more active. Retail energy price controls would have an adverse effect on a market that is working better than is generally realised - and would have ominous implications for other markets."

The main reason for the government to feel the pressure to intervene is that 50 MPs backed the idea of energy price capping in the House of Commons. However, the team of former regulators does not give heed to this solution and says that energy cap is not the best way to offer cheaper home energy plans to the customers. In fact, it will have a reverse effect on the energy market and may result in big losses.

Shay Ramani, founder of energy price comparison site FreePriceCompare.com, shared his opinion on the matter by saying that “Government intervention would work in favour of the UK customers that have never changed their tariffs. The intervention is a threat for the dominating Big Six energy suppliers and price capping would bring the energy prices to similar levels and thus prove hazardous for the competition in the energy market. However, a certain government control would help in keeping things under control.”

“The base line is that the price rise is a triggering factor for energy customers to start making energy price comparison and grab cheaper energy deals. Energy customers can save hundreds of pounds on their energy bills by simply comparing and switching suppliers.” He added.

Well, now we have two sides of the coin in front of us however, nobody can deny the sky rocketing price rise made by the Big Six suppliers. This would put pressure on customers who would be left with no choice but to switch to cheaper energy suppliers. As customers on the SVTs do not show any trends of home energy comparison, the Big Six are leveraging the opportunity by announcing huge price hikes.

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