Government action on energy prices delayed by snap election

19 April 2017   By Samantha Smith

THE Business and Energy Secretary Greg Clark has confirmed that the Government will soon act on rising energy prices, although the timing of their action may be delayed by the snap general election called yesterday.

gas hob burner energy
Credit: MashaSay/

Speaking to the Business Select Committee, Mr Clark responded to questions by affirming that "the market isn't working for those customers on the default tariffs", and that the Government will provide "decisive" action that "will address [the] completely unacceptable detriment that ordinary working people have been suffering".

His vows come after a long winter of prices rises from the Big Six energy providers, with EDF even announcing a second price rise for 2017, which in combination with the first will push up their standard electricity rates by 18.1%.

Yet while the Energy Minister did promise "muscular" and "strong" action on standard variable tariffs (SVTs), he admitted that because of the surprise election announcement the Government need to "reflect on" whether their plans can "be finalised in time".

Price rises

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In other words, everything remains vague, although what's certainly much clearer is the fact that energy providers have been squeezing their SVT customers to an extraordinary extent as of late.

SupplierElectricity riseGas riseDual-fuel rise
British Gas0%0%0%
Scottish Power10.8%4.7%7.75%

On March 16th, for example, npower introduced a 9.8% increase on their dual-fuel bills, joined by Scottish Power's 10.8% electricity rise on March 31st.

These two are also due to be joined in a week or so by E.On and SSE, who later this month will impose electricity rises of 13.8% and 14.9% respectively.

Then, in June, EDF will follow up an initial electricity hike from March with its sequel, with British Gas being the only member of the Big Six who won't be hitting customers with steeper bills.

They promised to freeze their SVTs until August, after pressure from Ofgem and other groups to the effect that there was no justification for rises.

Relative price cap

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And with this mounting pressure and criticism, it appears as though the Government are finally prepared to do something about mounting bills.

At the Conservative Spring Forum in March, for instance, Prime Minister Theresa May announced that "the market is not working as it should" and that plans for tackling high SVTs would be announced "very soon".

However, while much air has been devoted to the issue, and while even the PM promised action "very soon," it would now appear that the pre-existing timetable has been thrown into uncertainty.

There is of course the possibility that Mr Clark and his team will strive to put together their proposals more quickly now, so that they're ready for the Conservative Party to use them to win votes.

But then again, it's just as likely that they'll be put on the back burner, as Greg Clark and other ministers concentrate on reclaiming their seats.


This uncertainty drew criticism from the Committee, with Iain Wright MP even suggesting that because of Government indecision suppliers were given time to put up their SVTs in anticipation of an intervention.

He said, "One of the arguments for EDF's price rise, it's second, last week, is that it's pre-empting any Government action. Your delay is actually putting up energy prices for customers. So why can't you act now?"

Yet perhaps the most criticism should be reserved for the lack of clarity as to what Government intervention will look like.

This came out when Mr Clark was asked if he supported the relative price cap proposed during a House of Commons debate in March by John Penrose MP. This would involve setting a maximum allowable difference - at something like 6% - between a supplier's cheapest and most expensive tariff.

His response was simply that it merited "attention", and rather than specifying the Government's favoured course of action, he merely voiced general support for the CMA's energy market review from last year and for the need to "set a framework" that corrects the market's failure.

SVTs and fixed tariffs

Yet to be fair, not pinning his flag to a price cap before any formal announcement of one is perhaps a sensible policy, if only to avoid having another provider increase SVTs in advance.

But while there are several consumer groups who already support such a cap, there is the danger that it might have adverse effects.

For one, there's the risk that providers may increase their fixed tariffs to compensate for having their SVTs limited, something which would punish those customers who do actually shop around.

And in the longer term, it's perhaps not a viable solution, since the capping of prices could reduce the financial incentive for providers to invest in their networks. In turn, this could reduce the UK's energy supply, which somewhat ironically would make energy more expensive as a whole.

This is why, after all, it's perhaps sensible that the Energy Minister is "reflecting" on a price cap carefully, even if there's little doubt that energy companies are taking advantage of many of their most vulnerable customers.

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