Government forced to recommit to flagship energy cap amid reports Whitehall were looking to scrap it

Cross-party MPs and smaller energy suppliers wrote to the Government after reports that energy investors had been told draft plans could be shelved next year

Lizzy Buchan
Political Correspondent
,Michael Fowler
Friday 03 November 2017 23:23

The Government has been forced to recommit to its flagship energy price cap after The Independent revealed Whitehall officials were paving the way for the plans to be scrapped.

While ministers have said they want legislation to tackle sky-high energy prices to come into force, they conceded it would only happen subject to parliamentary time.

Cross-party MPs and smaller energy suppliers wrote to the Government after it emerged that energy investors had been told that Theresa May’s draft proposal will be ditched if ministers felt the Big Six suppliers were doing enough to tackle high bills.

Theresa May promised to bring in a price cap in the Conservative manifesto and again in her recent party conference speech, where she claimed the current system “punishes loyalty with higher prices”, hitting “people on low incomes, the elderly and people with low qualifications”.

Tory former minister John Penrose, who drafted the letter citing The Independent’s report, accused several large energy suppliers of “conning customers” by simply changing the name of standard variable tariffs (SVT) but keeping the same price structures in place.

In a written reply, Energy Secretary Greg Clark said: “As you know, I believe that Ofgem should exercise their powers in this respect, but since they have indicated that they do not intend to use these powers fully, I believe Parliament should compel them to do so. That is why I have published a draft bill.”

Mr Clark added: “I can confirm that the Government intends to legislate on this matter in order to protect customers from excessive charges.

“We will take forward legislation as soon as parliamentary time is available, subject to considerations of the BEIS Committee’s pre-legislative scrutiny and if Ofgem fails to exercise its powers.”

Tory insiders who back the cap have raised concern that the Draft Domestic Gas and Electricity (Tariff Cap) bill will never be written into full legislation or passed before the current parliamentary session runs out of time.

The proposed cap has sparked a rift in the Tory party, with growing pressure to bring it in from backbenchers who promised action on energy bills to voters during the election campaign.

However, it is understood that senior Conservatives, such as Chancellor Philip Hammond and Communities Secretary Sajid Javid, have concerns, as some opponents believe the move is anti-business and plays into Jeremy Corbyn’s interventionist agenda.

Keith Bastian says ‘Big Six suppliers and government policymakers are part of the same old boys’ network’

Keith Bastian, founder of Leicester-based Fischer Energy, one of the letter’s signatories, said: “Big Six suppliers and government policymakers are part of the same old boys’ network so it is no surprise that strings are being pulled behind the scenes – this is something we’ve know of for some time.

“Should the draft bill be dropped, we would like an inquiry into the links between the Government and Big Six suppliers.”

He added: “The energy price cap is imperative in bringing fair prices to millions of customers.

“We applaud The Independent’s revelation that the Government are now considering shelving the draft bill, expect Big Six suppliers to gain a further stranglehold on the market and for gas and electric prices to rise in the long term.”

It comes after a transcript emerged of a telephone call in which an energy investor was told by an official at the Department for Business, Energy and Industrial Strategy, that the plans could be dropped in early 2018.

The investor asks whether elements of the cap proposal can be changed and is told the draft still has three to six months pre-legislative scrutiny before it is even introduced to Parliament as a bill.

The official added: “There will be a decision point from the Secretary of State, based on the state of the market and the process made by [energy regulator] Ofgem on its cap, on whether there is any need for the bill.”

The Prime Minister’s announcement came as a surprise to the energy industry as the Big Six gas and electricity suppliers saw billions wiped off their stock market valuations after Ms May outlined her plans to the party faithful in Manchester last month.

More than 18 million households are currently on standard variable or other default tariffs and the market watchdog found customers paid out an additional £1.4bn a year in bills.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments