Government has brushed off concerns from the industry that its cap may stifle the market’s burgeoning competition. Instead it will insist on a market-wide intervention even after the industry regulator and the Competition and Markets Authority stopped short of backing the move in previous probes into the market.
Industry sources have called for the Government to do more to protect vulnerable energy users, improve the energy efficiency of homes or scrap the use of default tariffs altogether.
“The government should be looking at the most cost-effective way to reduce energy bills. This includes innovative and effective technologies such as energy efficiency and demand response. But the proposals for price caps completely ignore the potential for reducing energy consumption,” said Catherine Mitchell, a professor in energy policy at the University of Exeter.
The cap comes as fresh data shows that the market price for energy has climbed in recent months, and price shocks could emerge later in the winter. A sudden surge in market prices could leave energy suppliers severely squeezed if they are unable to raise prices, which would be particularly threatening for smaller players.
Market specialists at ICIS said the market price for power in the third quarter averaged £44.98 per megawatt hour (MWh), up over 5pc from the quarter before. Meanwhile gas for delivery next year rose almost 3pc.