12 April 2018

Update

With the energy price cap bill currently progressing through Parliament, careful design and implementation will be key.

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Access to affordable energy is key to all consumers across the UK, particularly the most vulnerable. Alongside the need to support consumers there is also a need to ensure stability and confidence in the market as well as competition and innovation. This will be key to ensuring the energy sector can deliver for customers while also supporting the transition to a low-carbon and secure energy system.

Pre-legislative scrutiny

Following its 2017 manifesto commitment, last October the government published its draft Domestic Gas and Electricity (Tariff Cap) Bill, which was submitted for pre-legislative scrutiny by the Business, Energy and Industrial Strategy Committee.

The CBI provided written evidence to the committee, stating that careful design and implementation of the cap would be crucial, and suggested improvements to the draft legislation. This centred on the right to appeal the level of the price cap to the Competition and Markets Authority (CMA), and greater clarity on how and when the price cap would be removed.

The committee supported the government’s proposal for an absolute price cap, and made a series of recommendations which the government accepted in full.

Introduction to Parliament

The final Bill was introduced to the House of Commons in February, undergoing its Second Reading shortly after, where MPs debated the detail of its proposals. The CBI’s Second Reading Bill Briefing reiterated the need for careful design and implementation to allow for continued competition, investment and consumer engagement. It further underlined the need for a merits-based appeal route, arguing that the CMA is the right body to form judgements on highly complex and technical issues across all regulated markets.

This Bill has cross-party support and there is a very clear ambition to have a price cap in place before Winter 2018. As such, there were very few amendments put forward at the Commons Committee stage, with a number of small changes debated, but almost all either withdrawn or voted down.

Next steps

The CBI has engaged on the Bill process, and will continue to do so as it makes its way through the legislative process.

While the timetable is not completely finalised, the Government has a clear ambition to get Royal Assent before Summer Recess, making the Bill an act of Parliament and allowing it to come into force. This gives Ofgem the room to consult on the price cap, something they have suggested would take up to five months, before potentially introducing the cap in time for Winter 2018.

For more information, please contact Hannah Richmond