In February of this year, an urgent report released by MPs stated that the government’s planned cap on energy bills should be introduced as an urgent measure to stop energy companies overcharging their customers.
The select committee went on to state that competition between the energy companies was not working, and was failing to provide fair prices for consumers. Reports suggest that 12 million customers are stuck on Standard Variable Tariffs (SVT), paying up to £300 a year more than for their energy than others.
Whilst consumers have been advised to shop around, some households are stuck into these tariffs and the committee says that people shouldn’t be penalised by not shopping around for their energy.
They state that a cap should be temporary and rather than be set by other tariffs, should be set at an absolute level. If a relative cap were to be implemented instead, it might create an incentive for suppliers to increase their lowest prices to maintain overall profits. Ofgem suggests that the government’s plan for a price cap would protect consumers from high energy bills.
However, price comparison and switching service uSwitch said price caps could do ‘more harm than good’ if it undermines competition between energy companies. Energy UK, which represents the industry, also said more customers were actively switching between suppliers to secure better deals and that a cap could hamper competition between the energy companies.
Time will tell what the result of these discussions will be, with governments suggesting a price cap by summer, and the various agencies arguing against the cap, we’re sure this won’t be as simple a solution as it first appears. We’ll keep you posted on these news stories and much more.