Time to put a cap on it

  • techUK techUK
    Wednesday14Feb 2018

    BEIS Select Committee report recommends swift implementation of an absolute energy price cap

The Business, Energy and Industrial Strategy (BEIS) Committee have now published their report into the Government's proposed price cap proposals currently before Parliament in the shape of the 'Domestic Gas and Electricity (Tariff Cap) Bill'. 

This legislation proposes an absolute price cap with an aim to reduce the price that customers on standard or default tariffs are charged, with a sunset clause of 2023 at the latest.

The BEIS Committee fully supports the Government's proposal and paints a damming view of the energy market, describing it as being two-tiered in nature and one that does not deliver fair or effective competition. 

In particular the Committee cited the overwhelming evidence that SVTs affect vulnerable customers the most, with over 83% of people in social housing, 75% of those on low incomes, 73% with no qualifications and 74% of disabled customers on such tariffs. The Committee noted that suppliers themselves struggle to identify vulnerable customers and that Government could do more to assist them so that those customers can be directed to support schemes and propose an amendment to the Digital Economy Act to allow for increased data sharing.

In backing the Government’s approach, the Committee cite the example of Northern Ireland in which a price cap has protected vulnerable consumers, but still allowed for price differential and meaningful competition. Indeed the Committee believe that the Government should aim to push the Bill through before the summer so that it can come into effect in time for winter.

In terms of duration and level of the cap, the Committee approves of the 2023 sunset clause with an annual review from 2020. Setting the level of the cap is to be left to Ofgem with a review every 6 months in order to reflect suppliers costs.

In summary the report indicates that if the Government wishes to press ahead with the price cap, there will be little opposition to such an approach. Of course this addresses a key symptom but not the root cause of our energy challenge as we seek to transition to a smarter, more flexible power system. We will be continuing to focus on this transition and how we can introduce more innovation into the energy sector throughout this year. 

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