Theresa May’s government is preparing to intervene in Britain’s energy market to weaken the influence of the big six providers and stop the poorest families being forced on to the most expensive tariffs.



In a speech that had echoes of the previous Labour leader, Ed Miliband, who promised to introduce an energy price freeze, the prime minister argued that the market was “manifestly not working for all consumers”.

Addressing the Conservative party spring conference in Cardiff, she said she supported competition but was prepared to step in on behalf of consumers.

“Energy is not a luxury,” she said. “It is a necessity of life. But it is clear to me – and to anyone who looks at it – that the market is not working as it should.”

The Conservative prime minister said prices had risen by 158% in 15 years, hitting ordinary working families with soaring heating and lighting bills.

“The vast majority of consumers, especially those with the lowest incomes, are on the most expensive tariffs,” she added. “Relying on switching alone to keep prices down is clearly not working.”

May argued that her Conservative party did not end the “inefficient” monopolies of nationalised energy companies just to replace them with a system that trapped the poorest.

“So we are looking very closely at how we can address this problem, and ensure a fairer deal for everyone,” the prime minister said. “We will set out our plans very soon.”

May has been warning she would intervene in broken markets since the Conservative party conference last year. But the government has faced increasing pressure to introduce a price cap after five of the big six energy suppliers hiked prices for millions of people in recent months, some by as much as £109 a year for dual fuel customers.

The energy regulator Ofgem told MPs last month that it had the power to impose such a cap, but only if directed by ministers. The government is expected to spell out its plan in a green paper in April.

Ministers said on Thursday that it was unacceptable that customers of the big energy companies were paying more than necessary. However, energy minister Jesse Norman, added: “It must be noted that wholesale prices, which account for about half of an average bill, are still lower than in 2014. This is a moment not for crisis, but for sober reflection.”

During a House of Commons debate regarding energy bills, Conservative MP John Penrose reiterated his call for a relative price cap, where there is a limit on the gap between the worst and best deals. “Under these proposals, energy firms would still be able to compete on price,” he said.

Following the debate, analysts at investment bank Jefferies said it viewed government action as increasingly likely. First Utility, one of the largest suppliers outside of the big six said it was encouraged by May’s comments and “government intervention now looks like the only way to ensure the benefits of competition work for all customers”.

But comparison sites and British Gas, the UK’s biggest energy supplier, argued that any price cap would ultimately hurt competition and consumers.

“Bring price caps in and we’ll be back to square one, with higher prices, even more disengaged consumers and suppliers with no reason to offer good deals,” said Richard Neudegg, head of regulation at uSwitch.com.



The charity Citizens Advice has argued that poorer customers often get punished for loyalty, by being put on to expensive standard variable tariffs. They are calling for a price cap due to come into place for prepayment meters in April to be extended to customers on those rates.

Ofgem recently announced that the cap for those who prepaid for their energy would cover more than 4m households, with bill reductions estimated to be around 10-15% or £80 a year.



The chief executive of Citizens Advice, Gillian Guy, said: “The prime minister is right that the energy market is not working for everyone. Over 2 million low-income families and pensioners in Britain are paying £141 more each year because they remain on their supplier’s standard variable tariffs.”

She said the prepayment meter price cap should cut bills for millions when it comes into force in April. “Extending the cap to standard variable tariff customers eligible for the warm homes discount would be an important first step to protecting many more of those who pay over the odds for their gas and electricity.”

