Next week, the Government will publish a draft Bill to put a price cap on energy bills.
Energy costs are 3-4 per cent for the average family, but can be up to 10 per cent or more for poorer households. Energy costs have risen around 150 per cent since 2004. In 2016 the Competition and Markets Authority reported that the total degree of overcharging could amount to £1.4 billion annually.
While the Conservative Government is in favour of free markets, we will always take action to fix them when they’re broken. We will always take on monopolies and vested interests when they are holding people back.
Currently about 60 per cent of people are on rates called Standard Variable Tariffs. These are the default tariffs that they end up on if they do not actively choose to switch, either to another company or to another rate at the same supplier. These tariffs are generally much higher than the rate you would pay if you switched to a fixed term deal. For a typical household’s gas and electricity bill the difference between the average SVT for the Big Six companies (Centrica, E.ON, EDF, SSE, Scottish Power and Npower) and their cheapest bill is currently over £270. The most disadvantaged people do not switch to avoid the worst SVT tariffs. As a result customers who can either least afford it, and those who have been with the company for the longest period of time, are those that are paying the most. When energy prices fall, SVTs often stay high for these people, while others who switch benefit from the reductions.
One of the greatest examples in Britain today is the broken energy market. Because the energy market punishes loyalty with higher prices. And the most loyal customers are often those with lower incomes: the elderly, people with lower qualifications and people who rent their homes. Those who for whatever reason, are unable to find the time to shop around.
That’s why next week, this Government will publish a draft Bill to put a price cap on energy bills – meeting our manifesto promise and bringing an end to rip-off energy prices once and for all.