In her speech to the Conservative party Conference this week prime minister Theresa May announced that she would introduce a new energy bill that would cap prices for customers. The industry responds:

Richard Neudegg, Head of Regulation, uSwitch.com: “We have warned repeatedly that a widespread price cap will not improve the retail energy market as some think it will. All the evidence from previous interventions like this shows that it does not lead to long-term improvements for consumers.

“…A price cap condemns energy customers to more of the same – it lets suppliers off the hook by encouraging consumers to stay put instead of voting with their feet.”

Jon Davies, founder, Switching Energy: “The cap is likely to apply to those on a standard variable tariff (SVT); the price that customers who haven’t committed to a fixed price contract can expect to pay for their electricity and gas.

“Capping these prices isn’t going to incentivise people to switch to a cheaper tariff; it’s more likely to continue to drive apathy and keep millions of people paying more for their energy than they need to.

“The proposed cap will serve to perpetuate the old favourite of better prices for new customers versus a lack of reward for loyal ones, with those who choose to remain on a supplier’s SVT indirectly subsidising those who choose to constantly switch. Once again, energy switching is being misrepresented for political gain, rather than being debated in a constructive and non-partisan manner. There is an illusion that the government of the day should intervene to fix the energy market. While consumer choice and engagement need to be addressed, this won’t be driven by the government.”​

Iain Conn, Group Chief Executive, Centrica: “We agree that some further structural change is required. However, we have also been clear that price caps are the wrong solution. There is clear evidence that where they have been tried, they have been bad for customers. They limit choice, reduce competition, and prices tend to cluster around the cap.

“The main problem with the market is the Standard Variable Tariff. Rather than cap them, which will keep standard tariffs going, our position has been that they should come to an end. We believe a more effective and long-term solution would be for the regulator to end the Standard Variable Tariff across the industry and to make some other structural changes.

Stephen Fitzpatrick, CEO, OVO Energy: ”It is clear that eighteen years of light-touch regulation has not delivered an energy market that works for most consumers. This intervention will stimulate innovation and promote efficiency that will benefit millions of customers. We envision that the cap will set a ceiling on retail prices based on underlying market conditions, allowing headroom for efficient companies to operate profitably.

“In an ideal world we wouldn’t need a price cap but it is now the most effective way to ensure customers are treated fairly and are not overcharged for their energy. I hope that the industry will adapt quickly and that price regulation will not become a permanent feature of the energy market.”

Analysts Morgan Stanley Utilities: “The UK PM called in May for a wide ranging energy tariff cap. … It is probably clearer today that a wide ranging tariff cap is more likely than something tailored or limited to only a few customers. Therefore we feel we are getting closer to a solution that will fit with all stakeholders; government, Ofgem, customers, and suppliers.

“The government wants some cut to tariffs, a removal of the standard variable tariff (SVT) and competition and innovation to thrive (ignoring how these ideals may jar a little). Ofgem wants to see consumers protected and a competitive, well run market. The suppliers appear happy to be rid of the SVT (EON and Centrica have talked publically about doing so). Can suppliers cut tariffs to some degree at the same time to satisfy all parties?”

Analysts Agency Partners: “Ultimately the blanket caps should de-risk residential supply:

• A blanket cap means there should be no risk of further intervention with a Tory government. The political risk over-hanging residential supply was not going to go away even with extension of caps to vulnerable customers beyond the PPMs.
• It provides legitimacy for the large renewables and smart meter driven electricity tariff hikes in the pipeline.

“There is immediate downside, however. The market will remain extremely nervous until Ofgem proposals on margins are published. And that could easily be into 2018. Moreover, assuming that blanket tariff caps are not applied until mid-2018, deep discounting will intensify as suppliers try to gain or retain customers in preparation for switching rates collapsing.”

Gillian Guy, chief executive, Citizens Advice: “The Prime Minister’s announcement of a cap on energy bills could provide a solution to the runaway energy costs that the millions of people on default tariffs have faced for years.

“We’d encourage the government to look at what it can do to help households in the short-term, recognising that legislation can take time, including ensuring that protection for low-incomes pensioners and families comes into force this winter.”

Carolyn Fairbairn, Director-General, CBI: “Affordable energy matters for everyone and particularly for the most vulnerable. However, today’s announcement is an example of state intervention that misses the mark. Market-wide price caps are not the best answer. Suppliers are already acting, providing support to those on pre-payment meters, and continued action to phase out standard variable tariffs would benefit a wide range of consumers, including those on the lowest incomes.”

Doug Stewart, Chief Executive, Green Energy UK: “I don’t fear a price cap and bringing a close to the endless speculation would be welcome. With over 50 odd suppliers in the energy market, it will create a level playing field.  Anything that helps to restore consumer trust in the energy supply market is a positive move.  We will want to see the detail but I would hope that a price cap will bring an end to the ‘rip-off’, ‘stich up’ tags so freely associated with the energy industry, whilst not stifling competition and innovation in the sector.”