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Centrica in legal challenge to energy price cap | Centrica in legal challenge to energy price cap |
(about 2 hours later) | |
British Gas owner Centrica is to mount a legal challenge against Britain's upcoming energy price cap, arguing it has not been calculated fairly. | British Gas owner Centrica is to mount a legal challenge against Britain's upcoming energy price cap, arguing it has not been calculated fairly. |
The energy provider said it would apply for a judicial review against the regulator Ofgem, saying it had set the threshold too low. | |
The firm said it wanted not to delay the cap, due to come in on 1 January, but to change how it is devised. | |
The regulator said it would defend its proposals "robustly". | The regulator said it would defend its proposals "robustly". |
Ofgem proposed a cap on energy bills in September, following concerns that consumers were not getting best value for money from suppliers' default rates, or standard variable tariffs (SVT) . | Ofgem proposed a cap on energy bills in September, following concerns that consumers were not getting best value for money from suppliers' default rates, or standard variable tariffs (SVT) . |
It means an average dual fuel customer who pays by direct debit should pay no more than £1,137 a year, £68 lower than British Gas's SVT. | It means an average dual fuel customer who pays by direct debit should pay no more than £1,137 a year, £68 lower than British Gas's SVT. |
However, the policy has rattled some suppliers who say it will damage their profits and it has also been blamed for some smaller providers going bust. | However, the policy has rattled some suppliers who say it will damage their profits and it has also been blamed for some smaller providers going bust. |
In November Centrica warned the cap would cost it £70m in lost operating profits in the first quarter of 2019. | In November Centrica warned the cap would cost it £70m in lost operating profits in the first quarter of 2019. |
This was after British Gas shed 372,000 household accounts in the four months to the end of October as customers left its SVT. | This was after British Gas shed 372,000 household accounts in the four months to the end of October as customers left its SVT. |
Centrica says that Ofgem had not properly taken into account the wholesale energy costs that "all suppliers incur" when it devised the cap. | Centrica says that Ofgem had not properly taken into account the wholesale energy costs that "all suppliers incur" when it devised the cap. |
Explaining its decision to seek a judicial review, it said: "Through this action Centrica has no intention to delay implementation of the cap, and does not expect the cap to be deferred in any way. | Explaining its decision to seek a judicial review, it said: "Through this action Centrica has no intention to delay implementation of the cap, and does not expect the cap to be deferred in any way. |
"As we have previously said, we do not believe that a price cap will benefit customers but we want to ensure that there is a transparent and rigorous regulatory process to deliver a price cap that allows suppliers, as a minimum, to continue to operate to meet the requirements of all customers." | "As we have previously said, we do not believe that a price cap will benefit customers but we want to ensure that there is a transparent and rigorous regulatory process to deliver a price cap that allows suppliers, as a minimum, to continue to operate to meet the requirements of all customers." |
Ofgem told the BBC that it "carried out an extensive consultation process when setting the price cap and we believe that it offers consumers on poor value tariffs a fairer deal. | Ofgem told the BBC that it "carried out an extensive consultation process when setting the price cap and we believe that it offers consumers on poor value tariffs a fairer deal. |
"In the event of a judicial review we would defend our proposals robustly." | "In the event of a judicial review we would defend our proposals robustly." |
The regulator says the new energy price cap could save 11 million customers an average of £76 a year on their gas and electricity bills. | The regulator says the new energy price cap could save 11 million customers an average of £76 a year on their gas and electricity bills. |
But it has already said that the level of the cap is likely to rise in April 2019, to reflect the higher cost of wholesale energy. As a result, the average annual saving in 2019 is likely to be lower. | But it has already said that the level of the cap is likely to rise in April 2019, to reflect the higher cost of wholesale energy. As a result, the average annual saving in 2019 is likely to be lower. |