This article was written by Nathalie Thomas, Energy Correspondent at The Financial Times.
John Penrose has criticised Watchdogs for not imposing a cap on electricity and gas bills.
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Britain’s energy market regulator is “scared to do its job” according to a leading campaigner who wants a price cap on household electricity and gas bills. John Penrose, a backbench Conservative MP, attacked Ofgem for only consulting on a “safeguard tariff” to protect 2.2m “vulnerable” customers, in spite of promises by Theresa May, the prime minister, before the June general election to reduce energy bills for 17m households by £100. He responded to an interview with the Financial Times this month, in which Dermot Nolan, Ofgem chief executive, said putting a price cap on the bills of 17m households was a “policy matter for government” and that, in his view, legislation was the “most effective way” of going about it. If Ofgem brought in a cap without legislation, there would be a “substantive appeal route” for utility companies, with complaints likely to be referred to the competition regulators, which last year ruled out a wider price cap following a two-year investigation into the UK retail energy market.
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Instead, the Competition and Markets Authority recommended a number of other proposals to try to encourage switching in the market, although one suggestion — to allow energy companies to market directly to rivals’ customers if they have been on an expensive tariff for a long period — has already been put on hold following problems with trials. Mr Penrose said Ofgem should not be shying away from pushing through a cap for a greater number of customers. The regulator has all of the legal powers needed to to do so and should be honest about its position, he said. If Ofgem fails to take measures to protect all households, it should be replaced by a “heavyweight cross-sector regulator”, added Mr Penrose. “If Ofgem won’t bring in a cap to help 17 million consumers, despite having the powers to do so, it needs to state clearly that it can, but it won’t,” he said. “And if Ofgem doesn’t have the guts to go into battle with the big six [energy companies] on behalf of consumers — if it turns tail and runs at the first sign of a legal challenge, it is useless. “Instead, as I’ve been arguing for some time, we will need a new, heavyweight, cross-sector regulator that isn’t scared to do its job.” Mr Penrose’s comments are an attempt to end the arguments between ministers and Ofgem over who should introduce a wide-ranging price cap.
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Following the election Greg Clark, the business secretary, hit the ball into Ofgem’s court by writing a letter to Mr Nolan asking him to explain what action the regulator intended to take to protect households on the poorest value energy tariffs. About two-thirds of households are on so-called standard variable tariffs, which leave them vulnerable to unexpected price increases at the whim of their energy supplier. All of the big six energy companies, plus many smaller suppliers, have angered households and MPs this year by raising prices. Ofgem said: “A price cap for all customers on standard variable tariffs would represent a significant change in policy. “While Ofgem has wide-ranging powers to impose licence conditions on suppliers, including such a price cap, we believe that the decision is a matter for parliament, not an unelected regulator. “Legislation would be the quickest and most effective way to introduce such a cap. In the absence of legislation, we are stepping up our efforts to get suppliers to help all customers, particularly those on poor value standard variable deals, get a better deal. We will also shortly consult on implementing a more targeted safeguard tariff for vulnerable customers.”
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