Plant Engineer News

Industry divided on introduction of energy price cap

3rd Jan 2019

The government price cap on default tariff energy bills came into play on January 1 in a huge shake-up of the sector.

But despite the prospect of a reduction in annual energy bills, experts have warned that consumer savings could be lost within months due to the variable nature of the cap, which can move up or down twice a year depending on costs faced by energy firms.

Critics of the bill claim that it will lead to fewer people searching the market for a better deal, and energy companies will look for other ways to make up for the fall in profits.

Ofgem claim the cap will benefit 11 million households who have stayed with the same supplier and were moved onto expensive default tariffs.

The tariff will be reviewed in February by Ofgem and adjusted in April and October based on market conditions. In 2020 the secretary of state will decide whether to extend it for another year.

"The energy price cap can only be a temporary fix - what is now needed is real reform to promote competition, innovation and improved customer service in the broken energy market," said Alex Neill, from Which?.

Energy UK, the industry trade body, said that energy firms were already facing price rises to the underlying cost of energy.

A spokesman said: “We have warned this could have unintended consequences for consumers, including damaging choice and competition for customers.”

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