UK energy price cap approved by MPs

Millions of British homes are in line for lower gas and electricity bills this winter after parliament approved a law capping energy tariffs.

The energy regulator Ofgem is now required to cap standard variable tariffs offered by the ‘big six’ energy providers for households using gas and electricity, which are far higher than other tariffs on offer.

British Gas, SSE, EDF Energy, E.ON, Npower and Scottish Power, which control 80% of the UK’s energy market, have been accused by the government of offering “rip-off prices”.

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Ofgem said the cap “will tackle the amount consumers have been overpaying”, but also urged consumers to switch energy suppliers, saying some could save up to £350 a year on gas and electricity bills.

The Competition and Markets Authority found that consumers have been overpaying by a total of £1.4bn a year.

Nevertheless, energy price caps have provided a politically-charged issue in recent years.

Capping utility bills was a key plank in Labour’s 2015 general election manifesto, but was rubbished by the then-prime minister David Cameron as evidence that Ed Miliband wanted to live in a “Marxist universe”.

The Tories were accused of hypocrisy when Cameron’s successor in Downing Street, Theresa May, included the policy her 2017 election manifesto.

“In 2015 freezing prices was written up as teenage Marxism,” wrote Philip Collins in The Times before last year’s election. “Now, lo and behold, it appears to be a reasonable response to hardship for the just about managing”.

He went on to argue, however, that “a blunt intervention in the energy market is a bad idea for a number of reasons”, citing the wide choice of suppliers available to customer, the incremental average price rise of just 3% since 2007 while energy companies’ profits remain flat.

“Price rises are due, essentially, to cost fluctuation” he said, and “price regulation is the sledgehammer that fails to crack the nut”.