Press release:

Energy price cap would be the death knell for competition

Commenting on reports that the Prime Minister will announce a price cap on energy bills for customers on Standard Variable Tariffs (SVTs) in the Conservative manifesto, Richard Neudegg, Head of Regulation at uSwitch.com, says: “Quite rightly, politicians want to ensure that consumers get a better deal on energy.  But a price cap on standard variable tariffs (SVT) would do more harm than good. Boosting competition, strengthening social policies like the Warm Home Discount scheme and helping disengaged customers access the best deals is the most effective way to deliver a fairer energy market for all.

“Price caps may sound like a magic bullet, but heavy-handed price intervention could have the unintended effect of leaving consumers worse off. Instead of lowering bills, previous market interventions in the energy sector have led to lower switching rates and higher prices – a finding backed by the CMA in its energy market investigation.

“A price cap would be the death knell for competition. It would remove any incentive for energy companies to drive down prices and fight to keep their customers, entrenching the position of the incumbent big six. It would create a false sense of security for consumers on poor value SVTs, reducing the chance of them seeking a cheaper deal.

“The evidence is clear that boosting markets and competition – not heavy-handed regulation – is the best way to keep prices low and help consumers get a good deal. The CMA conducted a thorough and expensive investigation into the energy market and offered a ready-to-go programme to address consumers paying too much on SVTs. The remedies should be fully implemented and given time to succeed.  This, combined with measures to protect the most vulnerable energy consumers, such as extending the Warm Home Discount, would deliver a fairer energy market for all UK households.”

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