British PM May vows energy price cap if re-elected

Tory business secretary defends energy price cap plan
Energy prices could still go up under Theresa May's price cap plans, admits Business Secretary Greg Clark

10 May, 2017

The Conservative leader vowed to place a cap on standard variable tariffs to remove the "injustice" of soaring energy costs.

Theresa May has admitted that electricity and gas bills could still go up under a energy price cap scheme proposed by Conservatives.

Tory bigwigs were tripping over each other before the 2015 election to pan Labour's price cap.

When the freeze was unveiled in 2013, then Conservative leaders including Prime Minister David Cameron described the policy as "dangerous" and "Marxist".

Rather than copy the "madness of Labour policy" by trying to buck worldwide markets, the level of the cap "should be determined by inspecting the wholesale prices", he said.

Analysts at RBC Capital Markets said the main reason for Tuesday's share price reaction was that May said the cap would apply to all standard tariffs, rather than just those customers deemed as vulnerable, as previously expected.

Energy bills have doubled in Britain over the past decade to about 1,200 pounds ($1,553.40) a year, angering consumers who face rising inflation and muted wage growth, and drawing the ire of politicians ahead of the national election.

"When the Tories say they'll "cap" bills, the question they need to answer is whether they can guarantee bills won't go up for people next year - that's the real test".

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The proposed Tory cap would be introduced on standard variable tariffs, which around 70% of households are on.

Theresa May has decided that an energy cap fits her political objective and has confirmed she will wear it into this election campaign. "Is that right? Asking for a friend", he taunted the business secretary, Greg Clark, on Twitter.

Iain Conn, the chief executive of British Gas owner Centrica, which saw its share price slide 1.58% on Tuesday after the policy was confirmed, suggested there might yet be some sops for the industry when the final detail was revealed. The energy industry has argued that a price cap will wipe out competition and force companies to increase the cost of their lowest tariffs. Crucially, it will be possible for that cap to move, and the independent regulator will set it.

"We have to remember we haven't actually seen the policy yet, as someone senior in government reminded me not so long ago, so we have to keep a cool head", he said.

"Instead of bringing in a price cap, the Government should spend some money raising awareness of switching and leave the mechanics of an increasingly vibrant and competitive market well alone".

"Further intervention risks undermining so numerous positive changes we are seeing in the market which are delivering benefits for consumers".

"As the Conservatives pointed out at the time, this will damage investment in energy when it is needed more than ever", he continued.

The Confederation of British Industry, which represents the country's biggest companies, also voiced concern, saying a "major market intervention" could hit investor confidence.

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