Energy Price Cap Will Not Save Consumers from Rising Bills

Whatever form the price cap on standard domestic energy bills announced by the Prime Minister today takes, consumers will have to pay more for their energy in the coming years, energy consultancy Cornwall has predicted.

Before inflation, cost increases of £50/ household for policy and networks are locked in over the course of the next Parliament, and at the moment wholesale prices have rebounded from last year’s lows. Administering the price cap, therefore, risks being tantamount to signing off bill increases for the industry.

If suppliers react to the cap by levelling up their prices through removing or repricing cheap fixed deals, many millions of engaged householders could see their bills rise significantly. If they respond by tracking the cap for their wholesale costs, further innovation such as the fixed price tariffs that saved those engaged consumers money in recent years, will not happen. Choice and variety will diminish and not increase, and the spread of tariffs could tighten.

We have yet to see the full impact from the Competition and Markets Authority’s two-year investigation and the industry itself has come up with proposals to make the market work better for customers that should be looked at very carefully. Capping prices may make short-term political sense but in the long term could undermine the market, and may open the door for continuing and deepening interventions in the future.

Cornwall Director Robert Buckley said: “We believe there are other interventions that are likely to have fewer unintended consequences and would bring better deals for consumers.”

News Source: Cornwall