Theresa May announces energy price cap which will cut gas and electricity bills for MILLIONS of households
Shares in Centrica - the UK's biggest power and gas supplier home to homes - fell as much as 5 per cent and SSE plunged 2.3 per cent before the speech
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RIP-OFF energy bills will finally be capped after Theresa May revealed radical plans for new laws to stop the Big 6 “punishing” millions with sky-high prices.
The Prime Minister said a draft bill would be published next week that would empower regulator Ofgem to introduce a ‘safeguard’ tariff without fear of being challenged in the courts.
Government insiders said the cap would apply to as many as £12million customers default or standard variable tariffs in a big victory for the Sun’s “Power to the People” campaign.
It would mark the first price controls in the domestic energy market for 15 years and could knock as much as £100 off the most expensive prices.
Nearly £1billion was wiped off the market value of British Gas owner Centrica and Scottish & Southern Energy as the City reacted in horror.
Speaking in Manchester, Theresa May said: "While we are in favour of free markets, we will always take action to fix them when they are broken.
How to cut your energy bills now
YOU don't need to wait for the new legislation to get lower bills.
If in doubt, call your provider and ask them to move you to their cheapest tariff.
Better still, use a comparison website like or Energyhelpline.com to find the very best deal for you.
The cheapest tariffs are usually found online and are fixed deals – meaning you guarantee how much you’ll pay for a set amount of time, usually 12 months.
Switching to a cheaper supplier could cut your bill by up to £300 a year.
The amount you pay varies depending on where you live and how much energy you use
"We will always take on monopolies and vested interests when they are holding people back.” "And one of the greatest examples in Britain today is the broken energy market.
"Because the energy market punishes loyalty with higher prices.
"That's why next week this Government will publish a draft Bill to put a price cap on energy bills, meeting our manifesto promise and bringing an end to rip-off energy prices once and for all."
Ofgem had been planning to publish its own proposals to end an estimated £1.4billion gas and electricity price rip-off next week. But it was only expected to recommend protection for around two million ‘vulnerable’ customers on benefits.
Downing Street yesterday said that under their proposals Ofgem would set the level of a cap – with savings for customers on bad deals, but enough “headroom” for people to be able to switch.
A spokesman added the measure was intended to be “temporary” and would be taken away when innovations such as smart meters enable more competition.
The Sun last year revealed customers on standard variable tariffs were paying as much as £300 more than those on cut-price online deals. At the time, Business Secretary Greg Clark said the Government had a “duty to act”.
Theresa May’s dramatic intervention yesterday follows a call from 192 cross-party MPs last week – including a quarter of all Tories – for her to live up to a manifesto pledge that appeared to have been binned after June’s Election disaster.
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Former Labour leader Ed Miliband – who proposed an energy price freeze in 2013 - mocked the Tories yesterday for daring to copy his idea after slating it four years ago.
He tweeted: “Cough, cough ... I am sure I've have heard this somewhere before.” British Gas declined to comment initially yesterday. Npower – owned by German giant RWE – said: “In common with many commentators we do not believe that a price cap is good for consumers or competition.
“However, whatever the regulatory model, we will do our utmost to make energy work for consumers.” Consumer champion Martin Lewis yesterday said he understood the anger – but a cap could be counter-productive.
Mr Lewis, founder of MoneySavingExpert.com, said: “It’s a national disgrace that a struggling 90 year-old granny pays substantially more to boil a kettle than an affluent web-savvy man like me.
“However a price cap done wrong can do more harm than good. Some in the Tories have called for a ‘relative’ price cap – which means a firm's most expensive price can only be a set percentage more than the cheapest. That’s self-defeating – it means they’ll just withdraw cheap deals.”
He added: “Politicians have to decide, do they see competition and switching as the solution, or do they want to regulate prices? For switching to work you need big price differentials – so some will have to pay more than others.
Peter Atherton at consultants Cornwall Energy told the Sun: “I really don’t think it’s a good idea. The worry is how it’s designed. Ministers will get into a situation where they will own electricity prices, energy prices.
“And going into winter the great temptation would be to keep prices down.
In that case you squeeze margins, hit innovation and competition.” An Ofgem spokesman said: "Ofgem's number one priority is to protect consumers.
"We share the Government's concern that the market is not working for all consumers, especially the vulnerable, and will work with the Government on their plans announced today to better protect consumers on poor value deals."
Iain Conn, Centrica chief exec, said the group had been "very clear" the energy market needed to improve "for the benefit of consumers".
But he said: ";We have also been clear that price caps are the wrong solution. There is clear evidence that where they have been tried, they have been bad for customers. They limit choice, reduce competition, and prices tend to cluster around the cap.
He added: “The main problem with the market is the Standard Variable Tariff. Rather than cap them, which will keep standard tariffs going, our position has been that they should come to an end." Centrica's shares ended down 6 per cent - wiping £600 million off their market value.
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