Ofgem announced the price of the October price cap today, with energy prices falling below £2,000 a year for the first time in 18 months.
However, the CEO of 100Green, Doug Stewart, is calling on the Government to scrap the price cap altogether, as it is no longer “fit for purpose”, causing the public to, quite literally, “pay the price” of the policy.
Stewart’s comments come after new research from 100Green found that a 1 in 6 (15%) UK homeowners weren’t aware of the recent drops in energy prices, and that another third (33%) of homeowners were only ‘vaguely’ aware. The research also found that almost two-thirds (63%) of UK homeowners were considering changing their energy to a fixed tariff in light of the recent changes.
Stewart doesn’t believe the price cap is something we can sustain in the long-term, even with the predicted reductions set to be announced today, commenting:
“The price cap was designed as a temporary intervention to prevent price gouging by some suppliers.
“But it has now remained in place for too long and become the ‘de-facto price’, meaning the Government, through their regulator Ofgem, is effectively setting prices, not capping them.
“In a volatile wholesale market, the price cap demonstrates the futility of trying to stop the international tide of rising prices and should not be Government policy.
“The price cap was devised at a time of benign wholesale prices and was never intended to cope with the disruption to the world markets brought about by the invasion of Ukraine; as a result, it is no longer fit for purpose.”
As such, Stewart is calling on the Government to scrap the price cap entirely, saying consumers are paying the price for the energy suppliers who used the price cap for their own benefit:
“The Government should scrap the price cap: it’s never been a cap, and in its current guise, it’s not doing what it was designed for.
They should allow suppliers who are financially robust to set prices in line with their hedging strategies but keep the ban on acquisition-only tariffs.
Acquisition-only tariffs are solely targeted to gain market share, and offer unsustainable prices, which generate losses for the companies that offer them.
This is ultimately what brought about the demise of 30 poorly funded suppliers in 2021 who used this model for growth.
The public are all now paying the price – literally.
“We need to return to suppliers being free to set prices, but support this with rigorous regulation to prevent a return to the race-to-the-bottom price mentality, which encourages price gouging when fixed term cheapest-price contracts come to an end.”
