TWO crucial tests will have to be passed if the Government’s emergency intervention on energy prices – sparked by David Cameron’s clumsily-worded statement at Prime Minister’s Questions last month – is to lead to lower fuel bills for householders.
First, Ministers need to demonstrate how the so-called ‘big six’ suppliers will not be able to exploit fluctuations in the wholesale markets. The reluctance of these firms to pass on reductions to their customers is the primary reason why many families now struggle to heat their homes.
Second, the decision to dramatically reduce the number of tariffs that are available to consumers threatens to undermine competition – the very notion that was supposed to keep costs in check when Margaret Thatcher’s government originally privatised the energy industry.
Limiting suppliers to just four tariffs is also likely to provide them with even greater scope to mirror the pricing policing of their competitors – with the long-suffering consumer set to be the biggest loser as suggested price decreases fail to materialise.
Energy Secretary Ed Davey’s response to these concerns was to point out how suppliers will be compelled, by law, to ensure that households are on the cheapest possible tariff. That may be so, but it still requires the ‘big six’ to be totally trustworthy in their dealings with the public, a guarantee which cannot be assured at present because of the extent to which they have framed their deals in language deliberately intended to bamboozle and make it difficult for families to switch suppliers.
As such, the Government should use the current consultation to see whether it can preside over changes that retain an element of choice, but in simple language which taxpayers can comprehend and puts an even greater onus on Ofgem to defend the public interest. That must take precedence over any short-term considerations designed to minimise David Cameron’s embarrassment after he appeared to start making policy on the hoof.