Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Centrica boss urges UK to rethink consumer energy price cap plan

Published 05/10/2017, 09:11
© Reuters. Electricity pylons are seen in London
EDF
-
IBE
-
CNA
-
SSE
-
EONGn
-
IGY
-

LONDON (Reuters) - Centrica (L:CNA), Britain's biggest domestic electricity and gas supplier, urged the government on Thursday to be more imaginative in its approach to restructuring the market, saying plans to cap prices would lead to less competition and less choice.

Prime Minister Theresa May stunned the industry on Wednesday when she announced a plan to impose price caps on standard variable tariffs, the basic rate that energy suppliers charge if a customer does not opt for a specific fixed term deal. Around 70 percent of households are on SVTs.

Centrica boss Iain Conn said he understood that the market needed further restructuring but added that instead the regulator should scrap SVTs altogether, forcing the industry to work harder to win new customers through competition.

"We do agree the market needs further structural changes," he told BBC Radio. "We just don't support price caps. There is clear evidence that they don't work, in New Zealand, in Spain, in California, in Ontario. They tend to limit choice, reduce competition and prices tend to bunch around the cap."

"The main problem with the market is the standard variable tariff, and rather than cap them ... we believe the standard variable tariff should come to an end, for good."

Energy bills have doubled in Britain over the past decade to an average of about 1,200 pounds a year, putting the biggest providers in the sights of politicians.

The market is dominated by the so-called big six providers -- Centrica's British Gas, SSE (L:SSE), Iberdrola's (MC:IBE) Scottish Power, Innogy's npower (DE:IGY), E.ON (DE:EONGn) and EDF Energy (PA:EDF), which account for about 85 percent of the retail electricity market.

Scottish Power and E.ON have also called for the SVTs to be scrapped.

May's proposal sent shockwaves through the industry on Wednesday, wiping millions of pounds off the value of the companies' share prices.

But Business Secretary Greg Clark said on Thursday the government had had no choice but to act, due to the high prices in the sector.

"A lot of people see themselves as loyal customers and because the companies know that they're loyal ... they are overcharging them," Clark told Sky News.

© Reuters. Electricity pylons are seen in London

"Faced with that evidence, I think you've got a duty to act.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.