Energy bills could be capped to protect loyal customers but Martin Lewis calls the idea ‘flaccid’
Martin Lewis warned that in order for consumers to be incentivised to switch, there must be big price differences between energy deals
A PROPOSAL by Conservative MP John Penrose to cap energy prices at six per cent above the firm's cheapest deal, has been labelled "flaccid" by Martin Lewis.
The money-saving guru urged Prime Minister Theresa May to ignore the Tory MP's call to impose a "relative price cap", which Penrose said would protect households that did not switch supplier.
But Martin warned that in order to have a competitive switching market there must be big price differences between energy deals, otherwise there's no incentive for consumers to switch.
Otherwise, Martin said, the government must "accept competition isn't the solution and regulate prices - which would mean those who don't switch would see prices drop, and those who do would see them rise."
He said that the idea of "relative price caps" would mean consumers get the worst of both worlds - some households would continue to overpay, while many firms wouldn't be able to offer really cheap prices, stopping people from switching.
He said: "If you want a competitive switching market, you must accept big price differentials - with some paying a lot more than others; if not, there's no incentive to switch.
"Alternatively, accept compeition isn't the solution and regulate prices."
"Politicians need to make their minds up. Either go for a competitive market and accept winners and losers; or tell firms what they should charge.
"Don't wimp out and sit in the middle."
Penrose, who has written to Greg Clark, the business and energy secretary, and Ofgem, the energy regulator, said that many customers would never switch despite measures to encourage them to do so.
He told : “For too long, energy companies have gouged customers who are too busy to go through the hassle of switching suppliers.
"We can’t solve this problem by bullying people to start switching.”
About two thirds of households in Britain are still on the expensive standard tariffs of the big six energy suppliers.
This means they could be paying as much as £389 a year more than those on the firms’ best deals.
Last week, The Sun Online revealed how officials are studying a proposal to effectively cap the most common energy tariff for two years in a desperate bid to fix Britain’s broken market.
It comes after Scottish Power followed Npower and announced an inflation busting 8 per cent price rise for dual-fuel gas and electricity customers.
British Gas separately said it was freezing its prices – until August.
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