U.K. Energy Industry Faults May's Election Pledge to Cap Pricesby
Intervention would create ‘huge uncertainty,’ Energy UK says
May will promise to cap energy prices in manifesto: Times
The U.K. energy industry opposes Prime Minister Theresa May’s proposal to impose limits on consumer bills as part of her Conservative Party’s election pledges, saying such steps would erode competition.
Intervention would create “huge uncertainty around government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system,” Lawrence Slade, chief executive officer of Energy UK, the industry’s main trade association representing over 90 electricity and gas suppliers and generators, said in an email Sunday.
May will promise in her election platform to cap energy prices for about 70 percent of U.K. households, the Sunday Times reported, citing a person in the party familiar with the plan. Work and Pensions Secretary Damian Green confirmed the report, saying on ITV’s “Peston on Sunday” that people feel energy companies have “taken advantage of them” by raising prices.
A limit imposed by the government could put more strain on Centrica Plc, the biggest energy supplier to homes in Britain, and SSE Plc, which are already among the worst performing utilities in Europe this year.
U.K. energy suppliers are already on the government’s radar. May said on March 17 that the energy market “is manifestly not working.” Energy Secretary Greg Clark last week said he’s considering a “muscular” crackdown as the administration tries to get Britain’s biggest suppliers to take voluntary measures to rein consumer prices for natural gas and power.
May last week announced a surprise general election on June 8, seeking a personal mandate to take her through Brexit talks. She might use energy prices to win constituencies in northern England held by the opposition Labour party, The Daily Telegraph reported April 19. There are 36 Labour areas that voted for Brexit and have a majority for Labour of less than 5,000 people, it said.
Price regulation will result in reduced competition and choice, and potentially impact customer service, Centrica Chief Executive Officer Iain Conn told The Sunday Telegraph. It would also raise questions over free markets in other sectors ahead of the U.K.’s exit from the European Union.
Centrica shares are down 11 percent this year and SSE 7 percent compared with a 3.6 percent gain for the Stoxx 600 Utilities Index.
Average variable tariffs for gas and power offered by the six biggest providers dropped about 4 percent from January 2014 to April 2016, according to regulator Ofgem. Still, they’re about 6 percent higher than they were at the beginning of 2012.
“The answer must be to see through the market reforms, allowing competition to drive innovation and benefits for consumers while ensuring that there is targeted support for those most in need,” Slade said.