THERESA May is vowing to slap an “absolute” cap on energy bills for up to SIX YEARS – but faced an immediate mutiny from her own MPs.
In a huge victory for the Sun, the Government finally unveiled plans to stamp out blatant profiteering by the Big Six.
This morning they published draft legislation that would put an upper limit on default, standard variable tariffs across England, Wales and Scotland.
The tariffs, which affect two-thirds of customers, around 18 million people – are as much as £225 more expensive than the cheapest deals.
The Competition and Markets Authority (CMA) found customers of the Big Six energy suppliers on these tariffs are paying £1.4 billion a year more than they need to.
Ministers insisted regulators will have to “impose the cap as soon as practicable”, which will initially run until the end of 2020 – with a possible extension to 2023.
But the draft bill did not provide any specific details on how the cap would work for suppliers trying to gauge the impact on their business.
The Prime Minister said: “I have been clear that our broken energy market has to change – it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much.
“Today’s publication of draft legislation is a vital step towards fixing that, and in offering crucial peace of mind for ordinary working families all over the country.”
But Mrs May faces an immediate battle to get the legislation through the Commons, as Tory campaigner John Penrose warned an “absolute” cap would clobber competition.
He is calling for a “relative” cap which will instead force suppliers to limit the difference between their most expensive and cheapest deals.
In a statement Mr Penrose – whose call for action is backed by 213 MPs – said: “A temporary relative price cap puts the customer in charge, so energy firms compete to offer the best, most creative and attractive deals.
“An absolute cap would throttle competition, be out of date as soon as the wholesale price goes up or down, and energy firms would spend more time lunching their regulators than delighting their customers.”
And Alex Neill, Which? managing director of home products and services, said: “For millions of consumers worried about their energy bills, a cap might sound like a positive move.
“However, the Government must guard against any unintended consequences that undermine customer service and push up prices as a whole.
“As it will take some time to come into effect, customers sitting on expensive standard variable tariffs should switch now.”
But Will Hodson co-founder of energy campaign group the Big Deal said: “It’s a disgrace that Big Six energy companies think it’s absolutely fine to charge their most loyal customers as much as £225 more than new customers.
“This price cap is hugely welcome.”
And Citizens Advice chief executive Gillian Guy said: “The runaway costs of default energy tariffs need to be tackled, and this draft Bill is an important step towards an energy market that works better for consumers.
“We agree with the Government that an absolute cap is a better option than a relative cap, and will help to ensure the market remains competitive so that consumers who shop around can still get a good deal. “
After the legislation was published the Business and Energy Secretary Greg Clark said: “People who show loyalty to well-known brands are paying hundreds of pounds a year too much on standard variable tariffs and I am determined that this practice should end.
“We have published draft legislation today, sending a clear message to the industry that we will protect the interests of their customers if they do act now to tackle the detriment found by the Competition and Markets Authority.”
British Gas owner Centrica saw its shares come under pressure once again after the cap announcement, falling by more than 1% on the FTSE 100 index.
But SSE was 1% higher, having already seen its shares tumble last week after Mrs May’s speech.
Michael Lewis, chief executive of E.ON UK, said: “A price cap will not be good for customers; it will reduce engagement, dampen competition and innovation.”