The cost of supporting Government policy and maintaining the country’s energy cables and pipelines are set to raise prices by £50 for every household, before inflation, over the course of the next Parliament.
These costs are locked in. The regulator would also need to take into account the rise of energy market prices which have rebounded over the last year.
“If suppliers react to the cap by levelling up their prices through removing or repricing cheap fixed deals, many millions of engaged householders could see their bills rise significantly,” Cornwall says.
“If they respond by tracking the cap for their wholesale costs, further innovation such as the fixed price tariffs that saved those engaged consumers money in recent years, will not happen. “Capping prices may make short-term political sense but in the long term could undermine the market, and may open the door for continuing and deepening interventions in the future,” the consultancy adds.
The stark warning goes some way to vindicating the concerns of the energy companies themselves. Already the Big Six – British Gas, SSE, EDF Energy, Eon UK, Scottish Power and Npower – have faced a two year battle to prove to the Competition and Market Authority that they do not profiteer from customers.