U.K. Said to Favor Voluntary Action to Control Utility Bills

  • Government prefers voluntary approach to reducing payments
  • Business Secretary ‘dismayed’ by CMA investigation findings

The British government won’t immediately force utilities to switch the energy tariffs of vulnerable customers, favoring voluntary action instead, according to people familiar with the matter.

Energy ministers may bring in mandatory changes such as capping domestic tariffs for existing customers if the voluntary approach doesn’t work, said one of the people, who asked not to be identified because the proposals are private. The government expects to see plans on reducing household energy costs from companies early next year.

The government has so far taken incremental steps to address a long-running issue of customers being put onto the most expensive tariffs if they don’t switch supplier, including naming and shaming those with the biggest proportion of users paying their highest rates. Utilities have been bracing for government action since Prime Minister Theresa May said in October that the way utilities charge their customers for energy is unfair.

Business and Energy Secretary Greg Clark signaled his dissatisfaction with how utilities treat their customers during a committee hearing with lawmakers Wednesday, saying he wanted a remedy to be done “right and properly.”

The Department for Business, Energy and Industrial Strategy declined to comment, instead referring to remarks made by Clark in November that he’s made clear to utilities that he has “concerns that customers are being punished for their loyalty,” and that he had told them to “move quickly and come forward with clear actions to change their behavior.”

The Competition and Markets Authority estimates that 70 percent of customers are on the most expensive tariffs. More than 90 percent of SSE Plc’s customers are on a so-called standard variable tariff -- the biggest proportion of any of the six biggest companies, according to a league table published by the regulator for the first time on Wednesday.

Price Cut

Companies may be beginning to take action. EDF Energy, the U.K. unit of Electricite de France SA, said Friday it will cut gas prices for customers on variable tariffs by 5.2 percent from Jan. 6 and would freeze electricity prices until March 1 before an 8.4 percent increase.

Chancellor of the Exchequer Philip Hammond in November said in his Autumn Statement that the government would “look carefully” at the retail energy market over the “coming months” to make sure it is functioning fairly for all consumers. That’s concerned utilities and investors that prices may be capped for a much wider group of customers, squeezing margins.

“We expect political risk to remain high through the first half of 2017,” Jefferies Group LLC said Thursday. The bank is expecting more direction from government in a green paper due in spring.

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