Theresa May vows to fix 'broken' energy market as she unveils plan to cap rip-off bills
Draft legislation to cap energy bills will be published later today in a bid to fix the “broken” market, Theresa May has announced.
The plans would allow watchdog Ofgem to impose price limits that would save about two thirds of households from rip-off energy bills, the Government claimed.
But the Prime Minister faces a backlash from her MPs because she intends to impose an "absolute" rather than a "relative" cap, according to the Daily Telegraph.
The Prime Minister has said she is in favour of free markets but has vowed to rein them in when certain sectors do not play fair.
“I have been clear that our broken energy market has to change – it has to offer fairer prices for millions of loyal customers who have been paying hundreds of pounds too much,” she said in a statement.
“Today’s publication of draft legislation is a vital step towards fixing that, and in offering crucial peace of mind for ordinary working families all over the country.”
More than 18 million customers are currently on standard variable tariffs or other default tariffs – many of which see them paying more despite their loyalty.
The Competition and Markets Authority said thousands of customers of the Big Six energy suppliers were paying £1.4bn a year more than they needed to.
Business and Energy Secretary Greg Clark said: “The energy market is broken. It punishes loyalty…
“That is simply wrong. While five million households will see their bills capped from this winter, I want to see every household protected from rip off bills.”
But the Telegraph says Tory MPs were hoping the Government would set a maximum mark-up between each company's best energy deal and the standard tariff, rather than an absolute cap.
Former minister John Penrose told the paper: "A temporary relative price cap puts the customer in charge, so energy firms compete to offer the best, most creative and attractive deals.
"An absolute cap would throttle competition, be out of date as soon as the wholesale price of gas goes up or down, and energy firms would spend more time lunching their regulators than delighting their customers."
Mrs May appeared to U-turn on her manifesto promise to cap energy bills when the plan did not appear in her Queen's speech after the disastrous general election.
But she appeared to change her mind after some 76 Tory MPs joined forces with other parties last month to demand she honour the commitment.