Business Secretary Greg Clark warned that the energy market is “broken” and needs fixing as he gave the big six companies, which dominate the market, four month to end excessive demands on consumers.
The bill, which was in the Tory election manifesto, will introduce an “absolute cap” on energy prices and prevent companies from charging more.
It would require Ofgem to consult and impose the cap “as soon as practicable” after the legislation is passed.
The Government said it had taken the step because the energy market “does not operate in the interests of the majority of consumers”, adding: “While we are in favour of free markets, we will always take action to fix them when they’re broken.”
The Competition and Markets Authority (CMA) found that customers of the Big Six energy suppliers on standard variable and default tariffs are paying £1.4 billion a year more than they need to.
Mr Clark told MPs: “The energy market is broken.
“It punishes loyalty – the independent competition authority found millions of people who are customers of the Big Six suppliers are overpaying to the tune of £1.4 billion a year.
“That is simply wrong. While five million households will see their bills capped from this winter, I want to see every household protected from rip-off bills.”
He added: “That is why we have published this draft legislation today – sending a clear message to suppliers they must act to put an end to loyal consumers being treated so unfairly.”
Will Hodson, co-founder of collective switching organisation The Big Deal, said: “This price cap is hugely welcome. Big Six companies have been overcharging their most loyal customers for years and years.
“The temporary nature of the cap is fine for now but it’s important that the Government is willing to extend the cap and even make it permanent if the Big Six companies don’t mend their ways. The challenge is now for suppliers, and switching sites, to find new ways to prevent British consumers from being ripped off.”
Alex Neill, Which? managing director of home products and services, said: “For millions of consumers worried about their energy bills, a cap might sound like a positive move.
“However, the Government must guard against any unintended consequences that undermine customer service and push up prices as a whole. As it will take some time to come into effect, customers sitting on expensive standard variable tariffs should switch now.”
Richard Neudegg, head of regulation at uSwitch.com, said the Government was “sending out completely the wrong message” by suggesting that a price cap will improve the retail energy market.
“The Government cannot have it both ways. This intervention will remove the most effective weapon in keeping prices down – competition. Instead it should focus their efforts on widening access to the Warm Home Discount for vulnerable households.”
Source : EXPRESS