Theresa May has announced the government’s intention to move forward with its plans to cap energy prices.
Theresa May has confirmed that a draft bill to cap energy prices will be released next week with the aim of bringing “an end to rip off energy prices once and for all”.
The cap was suggested in the Conservative Manifesto prior to the last general election but was not touched upon in the Queen’s speech in June, suggesting that the plans had been scrapped for the time being.
The news sparked a sharp drop in the value of the UK’s largest energy suppliers, with combined share prices falling by around £800m. It is thought that the cap will target standard variable tariffs which charge inflated rates to customers who fail to switch from their legacy incumbent supplier. Shares in Centrica, the parent company of British Gas fell to a 14-year low.
SSE also took a hit despite supplying less households via a standard tariff, with the company’s shares dropping to their lowest point since early 2016.
The full extent of the impact on share prices will be dependent on how significant the cuts will be and how long they will be in place. It is hoped that the cap will result in a saving of £100 a year, per household.
The energy regulator, Ofgem will be tasked with devising a plan to safeguard customers who receive little value from their current contracts.
A two-year investigation was carried out by the Competition and Markets Authority in 2014 on the referral of Ofgem but the final report did not suggest a cap on prices. Business analysts have also criticised the proposed plan with many predicting the changes will be ineffective.
Lawrence Slade, the chief executive of Energy UK, added that it is important that government does not risk “halting this growth of competition and engagement in the market”.
A number of energy companies, including E.ON and Scottish Power have called for the standard tariff to be scrapped completely instead of implementing price caps. Other firms have also requested improved energy efficiency measures and government-backed loan initiatives to help households install insulation or solar panelling.