“We are legislating to make sure energy companies put people onto the lowest tariffs.”
The government’s been accused of blowing hot and cold when it comes to household energy bills.
In October, in an unscripted moment during PMQs, the prime minister suddenly declared that energy suppliers would be forced by law to provide the cheapest tariffs.
It was the first the Department for Energy and Climate Change had heard of it, and the following 24 hours were spent issuing a number of clarifications, not least from Number 10.
Today, as British Gas reported a rise in profits of 11 per cent last year to £606m, with the news that the company had increased its prices even while profits continued to blossom, the question was reignited.
The former Labour cabinet minister Hazel Blears said: “The prime minister promised to take action. I think the whole country now wants to know – what is he going to do now to keep his promise to those families who are struggling to heat their homes?”
The prime minister replied: “We are legislating to make sure energy companies put people onto the lowest tariffs.”
The Energy Bill, which is still before parliament, gives the energy secretary the power to intervene and modify an energy company’s licence to make it reduce costs for customers.
It says the energy secretary can make the company give more information to customers, and force the company to limit the number of tariffs it offers.
All of these are provisions supported by the industry regulator, Ofgem, which has long been arguing for a “simpler, clearer and fairer energy market”.
Nowhere, however, does the Bill actually say that companies must place customers on the lowest tariffs – or face sanctions if they refuse.
So the government does have a new legal power to intervene, but the new bill won’t automatically force companies to move people on to lower rates.
We spoke to the consumer group, USwitch, asking whether what the prime minister had suggested in parliament was the same thing outlined in the bill.
A spokewoman said: “We believe they are different propositions. He came out with a very sweeping statement, and everyone took a sharp intake of breath and said what he was suggesting would end competition.
“It would have meant that everyone would end up on the one tariff, and it wouldn’t have given consumers any choice.
“Instead, the Bill captures some of the essence of that, but without taking it to the nth degree that Mr Cameron has.”
Mark Todd, co-founder of energyhelpline.com, agreed. “The Bill seems to give the government generic powers to change licences, but it doesn’t force companies to offer customers the cheapest tariffs.”
What both consumer groups also agree upon, however, is that the Bill is actually better than what Mr Cameron has suggested.
The industry wasn’t alone in saying that making companies put customers onto the cheapest tariffs was bad for them – Ofgem, USwitch and energyhelpline.com all agreed.
Mr Todd said that as well as reducing competition, having one tariff may mean that larger suppliers switch to a more expensive base tariff, which could mean customers end up paying more.
energyhelpline.com described Mr Cameron’s statement at Prime Minister’s Questions today as “just soundbite politics. Ed Davey [the energy secretary] tried to pull him out of a hole when he first said it, saying that the number of tariffs were going to be limited, but David Cameron seems intent on just digging deeper”.
And when we spoke to the Department for Energy and Climate Change to ask where in the Bill Mr Cameron’s claim that the government are legislating “to make sure energy companies put people on the lowest tariffs”, a spokeswoman told us: “It doesn’t specifically use that language. We have to take it on trust. This clause is specifically to give the government powers, not to say what the company should do.”
None of this means that the Energy Bill is a bad idea. Ironically, most consumers groups agree that it’s actually a better solution than what Mr Cameron thinks he’s proposing. The big question is why the Prime Minister is repeating the loose language that got him into hot water in the first place.
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