Amidst the announcement of an energy price cap by Theresa May, it was the energy regulatory body chief who suggested that the UK energy market needs price capping for around 15 years to balance. He expressed his views about the vulnerable and low-income customers who need to be protected from power suppliers till 2030. His remarkable comments were made towards the MPs and hinted that price capping needs to be extended considering the slow pace at which energy giants are taking steps to save energy customers from getting ripped off.
Ofgem chief Dermot Nolan clarified to the MPs by saying that “Given the importance of energy, heat and light, my own sense is that even 10 to 15 years from now there will be a need to include vulnerable people in some form of safeguard tariff.” He also mentioned that Ofgem cannot launch a nationwide energy cap in the absence of government legislation or else it might be taken to court by the Big Six energy suppliers.
The British Prime Minister Theresa May declared draft laws so that the energy regulator can execute an energy price cap on 17 million customers on SVTs. The declaration of draft laws from last week are aimed at facilitating these customers to get cheap energy bills. It said that energy price capping is the best solution for the customers on SVTs as they are paying around £300 extra when compared to what they would if they are on the cheapest gas and electricity deals.
However, energy experts cleared the air by saying that legislation would take at least a year for the price caps to get executed. Ofgem also fears that if the price cap is implemented before the legislation, they would face legal action from the Big Six energy suppliers. British Gas boss Sarwjit Sambhi has threatened the regulator with legal actions if it implements the cap before government’s law.
While the Big six energy suppliers are totally against the price cap due to the fear of making huge losses, there are cheaper energy providers like Ovo Energy which say that the price cap is the only way to create a balanced energy market.
Stephen Fitzpatrick, the chief executive of Ovo says that “In 19 years of deregulation nothing has worked. And since 2009 we have had 5 reviews, four by Ofgem, one by the Competition and Markets Authority. I’ve been here (in Westminster) five times answering the same questions and nothing else has worked.”
Ofgem Chief Dermot Nolan maintains that we need an absolute energy cap to sort out the problem of customers suffering from SVTs as relative cap can have adverse effects. He said that “We believe a relative cap would see suppliers keep SVTs relatively high and withdraw cheaper deals. This would not be good news for average customers.” Considering the current condition, it is obvious that a relative cap may not offer the cheapest energy deals to UK energy customers.
Shay Ramani, founder of FreePriceCompare shared his opinion by saying that “energy customers cannot afford to wait for the energy price cap. They need to save their time and money and switch to cheaper energy suppliers. A relative price cap would be a double edged sword as it may completely rule out the cheapest energy tariffs. So, it is advisable that customers decide to switch and get cheap energy bills.”
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