Will Government force energy companies to fix tariffs?

David Cameron made his tariff announcement in response to concerns over rising household energy bills. Photograph: Alamy

During the Prime Ministers questions in the House of Commons yesterday, David Cameron made an extraordinary announcement in regards to the rising energy prices. He said: “We have encouraged people to switch, which is one of the best ways to get energy bills down. I can announce that we will be legislating so that energy companies have to give the lowest tariff to their customers – something that Labour did not do in 13 years, even though the leader of the Labour party could have done it because he had the job.” Since this announcement, government officials have been forced to explain exactly what legislating will occur, and when it will come into force. The PM made his tariff announcement in response to concerns over rising household energy bills, but it appears that it may have backfired as many Labour politicians are now claiming that he was making it up as he went along, and he has no real policy to put forward.

The Shadow Energy Secretary, Caroline Flint, today put forward the suggestion that Cameron went a lot further than a policy being prepared by the Department of Energy and Climate Change (Decc) and has tripped himself up. And other Labour ministers accused the PM of making plans that were ‘unravelling by the minute’. If the new legislation is true, then this is a huge change of government policy for the Conservatives, who encourage free market trading and the competition that goes with it. To force all energy companies to put their customers onto the cheapest tariff would surely be against government policy and the very ideals that conservatives fight for.

Indeed, Ann Robinson of uSwitch.com, said: “This has to be a mistake – the unintended consequences would be to kill competition. Consumers will be left with Hobson’s choice – there will be no spur, no choice, no innovation and no reason for consumers to engage any more. The only glimmer of hope would be that smaller suppliers will be able to offer cheaper prices than the big six and therefore competition is able to continue in that arena.” And the announcement came as a surprise to those who work at Decc, as one source said: “We are looking at lots of ideas about how to use the law to get the lowest tariffs. We are exploring all the options.”

Other comparison websites are also predicting a loss of competition and warning that if this legislation does go ahead, it will have an adverse effect as companies will be then forced to raise charges even further. With Labour MP’s claiming that Cameron has shot himself in the foot with his announcement, the PM is now under increasing pressure to explain exactly what he meant by the energy companies in question. Perhaps even more surprising is that that none of the big fuel companies have come forward to confirm the PM’s new policy, despite the fact that four of the UK’s big six energy firms have already announced above-inflation winter price hikes.

The government now appear to be on a mop up campaign, with a spokesman for the PM stating: “We’ve asked energy companies to take action themselves and make clear what the lowest available deals are. The point is, in practice this market is not operating for everyone. A small minority of people are actually switching deals, therefore we need to push some of this responsibility on to the energy companies.” He said customers would have to wait until the bill was published, possibly in the autumn, for details of how the change would work in practice.

According to survey carried out by Martyn Lewis from the Moneysavingexpert.com website, most people would prefer a simple tariff and an easy way to work out their own bills, rather than the many thousands of tariffs available at present. And further advice from Lewis is that you should not switch at this present time, but aim to fix your tariff whilst your current provider is still cheaper than its competitors.

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