Theresa May's 'Miliband-light' energy price cap plan won't work, says Centrica CEO

iStock

Proposals for UK energy price caps unveiled by Prime Minister Theresa May could have the opposite effect and make hunting for cheaper energy bills a thing of the past, according to one of the country's leading energy suppliers.

Iain Conn, chief executive officer of British Gas owner Centrica, said there was a "real risk" that cheaper energy bills for people who switch and hunt for deals will disappear if the government pushed ahead with the cap.

Analysts are describing the proposals to cap standard variable tariffs as 'Miliband-light' in reference to a more draconian plan – proposed along a similar slant at the 2015 General Election – by former Labour Party leader Ed Miliband.

Advertisement

At its heart lies the age-old argument that while the government can impose price caps at the point of sale of gas and electricity, it has no control over the international wholesale market.

Speaking on BBC Radio 4, Conn said the danger is that by capping standard tariffs, cheaper deals – that consumers often hunt and bag via price comparison websites – would become a thing of the past as the mechanism to make money out of the market is materially altered.

Prices would then bunch around the set price cap hurting investment and industry competitiveness.

"This year in the UK, for example, a cap on bills for those on pre-paid meters has left prices typically within £2 of each other. Our message is wait don't go ahead with price caps, there's a much better way of solving this market for the long run," Conn concluded.

However, speaking on the same BBC programme energy minister Greg Clarke said the government plans to bring out a draft bill next week targeting standard variable tariffs which tend to be more expensive.

"If Ofgem [the regulator] needs legal back-up there is a strong consensus in parliament for this, so we will publish legislation and we'll invite the whole house to endorse this so that they have the legal certainty," Clark said.

Advertisement
READ MORE
© Copyright 2017 IBTimes Co., Ltd. All Rights Reserved.