In her speech today at Conservative party conference, Theresa May announced a draft bill that would give Ofgem full power to impose a widespread energy price cap. Here’s what Martin Lewis, founder of MoneySavingExpert.com and cheapenergyclub.com has to say about her proposals.
It’s a national disgrace that a struggling 90 year-old granny pays substantially more to boil a kettle than an affluent web-savvy man like me.
However a price cap done wrong can do more harm than good. Some in the Tories have called for a ‘relative’ price cap – which means a firm’s most expensive price can only be a set percentage more than the cheapest. That’s self-defeating – it means they’ll just withdraw cheap deals.
Politicians have to decide, do they see competition and switching as the solution, or do they want to regulate prices? For switching to work you need big price differentials – so some will have to pay more than others.
As the Tories want switching, what they need to do is decide who should be in a competitive market and who not; and protect those who can’t rather than won’t engage. As that’s difficult, any cap should simply be a set ceiling on rates, much like has been implemented in the prepayment market.
Yet imposing a cap will take at least a year to come in, and to channel Game of Thrones, winter is coming. Right now someone on a big 6 standard tariff with typical usage pays £1,130/yr on average, the cheapest tariffs are £820/yr – same gas, same electricity, same safety.
So no one should wait for the cap. Everyone should check if they’re on the best deal now; including our current Secretary of State for Energy, who ludicrously last year said he hadn’t switched as it was ‘too complicated’. If he still hasn’t worked out how it’s done, perhaps he shouldn’t be in charge of encouraging the rest of the nation to do it. Too many already choose between heating and eating.
Martin Lewis OBE, Money Saving Expert, is the journalist and consumer campaigner who created MoneySavingExpert.com and is now the site’s Executive Chair. Martin also founded and chairs the Money and Mental Health Policy Institute charity.