- August 7, 2023
- Posted by: legaleseblogger
- Category: Related News
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New Report Urges Government to Abolish Energy Price Cap
A new report claims that Ofgem’s energy price cap is hindering customers from accessing lower tariffs, leading to inflation, and suggests that the cap should be abolished. The Centre for Policy Studies (CPS), a centre-right thinktank, argues that the cap has exceeded its original purpose of customer protection and has essentially become a regulated market price. According to Dillon Smith, an energy and environment researcher at CPS, the capped level has been the pricing standard for almost two years, with no indication of it changing in the near future. As a result, the government is effectively controlling the market price of energy, eliminating competition and hindering customers from finding better deals. To rectify this, the report recommends moving away from a wartime regulatory regime and returning to a retail market with competition as its core focus.
The report not only advocates for the abolition of the energy price cap but also proposes stronger measures to combat fuel poverty. These measures include the introduction of a social tariff for households spending an excessive proportion of their income on energy bills, addressing the loyalty penalty for customers on default tariffs, and fostering a resilient energy market for the long term. With these changes, the aim is to protect consumers, promote fair competition, and ensure transparent and affordable energy pricing for all.
Craig Lowrey, a principal consultant at Cornwall Insight, emphasizes the need to explore alternative measures that better safeguard consumers, encourage fair competition, and ensure affordable and transparent energy pricing. Despite recent reductions in the price cap, households are still facing significantly higher bills compared to previous years. The purpose, efficacy, and impact of the cap on tariff competition are now being questioned.
The AI legalese decoder can provide valuable assistance in this situation. Through its advanced AI algorithms, the Decoder can analyze legal and regulatory documents, such as energy price cap legislation, and accurately interpret and explain the complex language used. It can help legislators and policymakers understand the implications of the cap and assess whether its effects align with its original goals. Furthermore, the Decoder can assist in formulating alternative measures and regulations that promote fair competition, protect consumers, and achieve affordable energy pricing.
In addition to the CPS report, another study by Future Energy Associates (FEA) suggests that household energy suppliers could earn ┬ú1.74bn in profits from customers’ energy bills over the next 12 months. The study reveals that the profit allowed per average customer on the variable tariff has increased from ┬ú27 in spring 2017 to a peak of ┬ú130 in early 2023, currently standing at ┬ú60. FEA advises caution when considering tariff switching and fixation, but acknowledges that there are some beneficial deals available.
Throughout the first few months of 2023, only five fixed tariffs were available to a limited segment of the market. However, in July, this number doubled, with ten new fixed tariffs becoming available. Energy UK, responding to the analysis presented in the report, points out that suppliers have faced losses of £4bn over the past four years, which the analysis overlooks. Ofgem has also acknowledged that while profits for many suppliers are expected to recover this year, this must be considered in the context of recent losses. The majority of customers are currently on price-capped tariffs, set by Ofgem to ensure fair pricing reflecting energy supply costs, and significant changes are unlikely in the coming months.
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