Energy companies blame Labour's price freeze plan for keeping prices high

Energy companies have been accused of having “101 excuses” for keeping prices artificially high. One excuse, according to Labour’s Shadow Energy Secretary Caroline Flint, is that if Labour comes to power next year, they might introduce a price freeze.

In a letter to the chief regulator, the head of the energy firm nPower, Paul Massara, has claimed that his company cannot risk reducing prices for customers, even though they are benefiting from a drop in wholesale prices, because Labour’s threat of a price freeze has “complicated all pricing decisions”.

Writing to Dermot Nolan, chief executive of Ofgen, he claimed: “We are acutely aware that if Labour were to implement their proposed price freeze, we will be living with the consequences of our standard tariff price for a very long time and beyond the level of risk that we could manage.”

His comments brought a scathing response from Labour’s Shadow Energy Secretary, Caroline Flint. “All the energy companies have 101 excuses about why they won’t cut their prices, but if nPower are publicly admitting that they are keeping their prices artificially high and the Government is doing nothing about it, that shows exactly why we need reform of the energy market and a Labour Government, ” she said.

Last September the Labour leader Ed Miliband announced that he planned to freeze gas and electricity bills for every home for 20 months, and split up the "big six" energy firms and introduce tougher regulation. The proposal to break up the big six was supported by the Tory chairman of the Commons energy committee, Tim Yeo.

In March, Ofgem called for an investigation into the big six to “clear the air”. The companies have retorted that the uncertainty created by an investigation and possible price freeze is deterring investment in new power plants.