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| Government had duty to stop energy firms overcharging, says Clark | Government had duty to stop energy firms overcharging, says Clark |
| (4 months later) | |
| Business secretary says consumers could start to benefit this winter from Theresa May’s pledge to introduce price cap | |
| Julia Kollewe | |
| Thu 5 Oct 2017 09.35 BST | |
| Last modified on Thu 5 Oct 2017 10.50 BST | |
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| The business secretary has said the government had a “duty to act” to stop energy companies overcharging customers, suggesting households will start to benefit this winter. | The business secretary has said the government had a “duty to act” to stop energy companies overcharging customers, suggesting households will start to benefit this winter. |
| Asked on BBC Radio 4’s Today programme whether the proposed energy price cap would be imposed on energy companies this winter, Greg Clark said: “Consumers who are suffering a detriment … could receive early relief for that.” | Asked on BBC Radio 4’s Today programme whether the proposed energy price cap would be imposed on energy companies this winter, Greg Clark said: “Consumers who are suffering a detriment … could receive early relief for that.” |
| Clark added: “If [energy regulator Ofgem] need legal back-up there is a strong consensus in parliament for this, so we will publish legislation and we’ll invite the whole house to endorse this so that they have the legal certainty.” | Clark added: “If [energy regulator Ofgem] need legal back-up there is a strong consensus in parliament for this, so we will publish legislation and we’ll invite the whole house to endorse this so that they have the legal certainty.” |
| He said he would be surprised if energy companies mounted a legal battle against the price cap, and pointed to “strong consent in parliament for this”. | He said he would be surprised if energy companies mounted a legal battle against the price cap, and pointed to “strong consent in parliament for this”. |
| Clark said “loyal customers” were being overcharged £1.4bn a year, referring to a report by the Competition and Markets Authority (CMA). | Clark said “loyal customers” were being overcharged £1.4bn a year, referring to a report by the Competition and Markets Authority (CMA). |
| “A lot of people see themselves as loyal customers and because the companies know that they’re loyal … they are overcharging them,” he told Sky News. “When you are faced with that evidence you’ve got a duty to act.” | “A lot of people see themselves as loyal customers and because the companies know that they’re loyal … they are overcharging them,” he told Sky News. “When you are faced with that evidence you’ve got a duty to act.” |
| However, there is scepticism as to how quickly the cap could come into effect. | However, there is scepticism as to how quickly the cap could come into effect. |
| Theresa May pledged to cap “rip-off” energy prices in her Tory party conference keynote speech on Wednesday, promising to introduce a draft bill next week to give the energy regulator, Ofgem, powers to cap the bills of people being “punished” for their loyalty and their inability to shop around. | Theresa May pledged to cap “rip-off” energy prices in her Tory party conference keynote speech on Wednesday, promising to introduce a draft bill next week to give the energy regulator, Ofgem, powers to cap the bills of people being “punished” for their loyalty and their inability to shop around. |
| But the Conservatives later admitted that they were only giving Ofgem the powers to impose a cap for everyone on a standard variable tariff, not actually ordering the regulator to impose it. | But the Conservatives later admitted that they were only giving Ofgem the powers to impose a cap for everyone on a standard variable tariff, not actually ordering the regulator to impose it. |
| At the moment, when fixed contracts come to an end customers are pushed on to more expensive standard variable tariffs. About 12 million people are on standard variable tariffs. | At the moment, when fixed contracts come to an end customers are pushed on to more expensive standard variable tariffs. About 12 million people are on standard variable tariffs. |
| Iain Conn, the chief executive of British Gas owner Centrica, Britain’s biggest energy supplier, warned there was a “real risk” that “cheap deals go because the mechanism changes” if the government pushes ahead with the price caps. | Iain Conn, the chief executive of British Gas owner Centrica, Britain’s biggest energy supplier, warned there was a “real risk” that “cheap deals go because the mechanism changes” if the government pushes ahead with the price caps. |
| Also speaking on the Today programme, Conn said there was “clear evidence that price caps don’t work”. | Also speaking on the Today programme, Conn said there was “clear evidence that price caps don’t work”. |
| He added: “In New Zealand, in Spain, in California and in Ontario they tend to limit choice, reduce competition and prices tend to bunch around the cap.” | He added: “In New Zealand, in Spain, in California and in Ontario they tend to limit choice, reduce competition and prices tend to bunch around the cap.” |
| He noted that a cap on bills for those on pre-paid meters in the UK had left prices typically within £2 of each other this year. | He noted that a cap on bills for those on pre-paid meters in the UK had left prices typically within £2 of each other this year. |
| A CMA report found customers had paid £1.4bn a year in “excessive prices” between 2012 and 2015, with those on standard variable tariffs (70% of the total) paying 11% more for their electricity and 15% more for their gas than customers on other tariffs. | A CMA report found customers had paid £1.4bn a year in “excessive prices” between 2012 and 2015, with those on standard variable tariffs (70% of the total) paying 11% more for their electricity and 15% more for their gas than customers on other tariffs. |
| Clark said: “This is a big amount and if consumers are being overcharged by £1.4bn a year it is right to act on that. | Clark said: “This is a big amount and if consumers are being overcharged by £1.4bn a year it is right to act on that. |
| “You do need competition, but what the competition authorities have established is that the energy market is not working well.” | “You do need competition, but what the competition authorities have established is that the energy market is not working well.” |
| He said there were essentially two markets, with savvy consumers seeking out the best deals online while many others stay loyal to a brand and end up being ripped off. | He said there were essentially two markets, with savvy consumers seeking out the best deals online while many others stay loyal to a brand and end up being ripped off. |
| Conn recognised there was a need to improve the energy market and accepted the industry “has an element of the blame,” but said instead of capping standard variable tariffs, they should be ended altogether. He said Ofgem could regulate to this effect. | Conn recognised there was a need to improve the energy market and accepted the industry “has an element of the blame,” but said instead of capping standard variable tariffs, they should be ended altogether. He said Ofgem could regulate to this effect. |
| Conn said: “Our message is wait, don’t go ahead with price caps, there’s a much better way of solving this market for the long run.” | Conn said: “Our message is wait, don’t go ahead with price caps, there’s a much better way of solving this market for the long run.” |
| The GMB union reiterated that Ofgem should be abolished and all its regulatory functions taken over by the government, making its regulatory role accountable to parliament with the powers to cap prices if deemed necessary part of the forthcoming legislation. | The GMB union reiterated that Ofgem should be abolished and all its regulatory functions taken over by the government, making its regulatory role accountable to parliament with the powers to cap prices if deemed necessary part of the forthcoming legislation. |
| Justin Bowden, the GMB national secretary, said: “Ofgem has been a toothless wonder that passed its use-by date years ago, it is not fit for purpose and now is the time for it to be replaced.” | Justin Bowden, the GMB national secretary, said: “Ofgem has been a toothless wonder that passed its use-by date years ago, it is not fit for purpose and now is the time for it to be replaced.” |
| Energy industry | |
| Energy bills | |
| Household bills | |
| Consumer affairs | |
| Greg Clark | |
| news | |
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