Mixed reactions to Ofgem announcement

Following passage of the Domestic Gas and Electricity (Tariff Cap) Act in July, the energy regulator is proposing a cap on standard variable tariffs*.

The Act and price cap come in response to exploitation of loyal customers revealed in an investigation of the retail energy market by the Competition and Markets Authority in 2016.  The main finding – that the industry was overcharging customers by £1.4 billion a year – caused public outrage.

In fixing the level of its first cap** Ofgem has aimed for (and arguably achieved) a worthwhile reduction for customers on high tariffs while still giving active customers an incentive to shop around.  Reaction has however been mixed, however.

Citizens Advice welcomed the proposals.  Gillian Guy, Chief Executive, said: “A cap on standard variable tariffs is an important step in the right direction, and one that Citizens Advice has repeatedly called for”.

Industry analysts and commentators sort of accept that something has to be done but point gloomily to the likely impact on competition and predict no long-term benefit for consumers.

The industry apparently still seems to think no action was necessary…….

@EnergyUKcomms says #EnergyPriceCap will be "significant challenge" but isn't that fair enough for a significant industry in present circs?? #dotheygetit https://t.co/3APNtPnVqJ

— ReigateBansteadCAB (@ReigateandBCAB) September 6, 2018

* Ofgem is aiming to confirm the cap level in November in time for the price cap to come in at the end of the year, subject to the statutory consultation process. The first update of the level of the price cap will be announced in February 2019 and come into effect in April 2019. Following this, it will be updated every six months.  Full announcement here.

** Under the new arrangements the price paid by a standard dual fuel energy customer would be £1,136 meaning a saving of £75 a year on average.