British energy companies suffered on Monday after the Conservative party confirmed a pledge to price cap “standard variable tariffs” in their manifesto expected to be published in May.
The two biggest energy companies in the UK, Centrica (owner of British Gas) and SSE, dropped by as much as 5% and 3% respectively during late-morning trading hours.
According to a report on the development by the FT, these “standard variable tariffs” are the most common household energy pricing structure.
Around 1.5 million low-income families with children are on standard variable tariffs and are paying an average of £141 more a year for a dual fuel gas and electricity bill than if they were on the cheapest deal, according to Citizens Advice.
Lawrence Slade, chief executive Energy UK, was quoted by Sky News as saying that price caps were not the answer.
“Only last year, the Government’s own competition regulator decided against introducing a wider price cap, instead opting for a cap for prepayment customers which came into force this month,” he said.
“Intervening further would undermine so many of the positive changes that we are seeing in the retail market. It would be giving up on competition, and at a time when we need engaged consumers more than ever.
“Intervention on this scale will additionally create huge uncertainty around Government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system.”
Some have criticised the Tories as ripping the plan off a similar proposal by former Labour leader Ed Miliband. Damian Green, work and pensions secretary, responded by saying that unlike Milliband’s proposal, the cap proposal by the Conservatives would see caps set by energy market regulator Ofgem, and would be “more flexible” and “reflect market conditions”.