Could a cap on gas & electricity harm customers in the long run? Christopher Bisping & Dr Timothy J Dodsworth report
- Government proposals to cap unit prices for gas and electricity will have a negative effect on competition.
- Regulation of the roll-over process, at the end of a contract term, would fulfil the desired objectives without reducing competition.
Recently the Department for Business, Energy & Industrial Strategy published its Draft Domestic Gas and Electricity (Tariff Cap) Bill, outlining proposals to allow Ofgem, the regulator, to cap unit prices for gas and electricity which are supplied on the standard variable tariff (SVT). The Secretary of State for Business, Energy and Industrial Strategy suggests that the cap is designed to make the market ‘truly competitive’ and to protect vulnerable and low-income customers from expensive tariffs. However, the measures proposed are not only internally incoherent but—judging from our research into mobile phone contracts—will have the opposite effect to what the government hopes to achieve (The Pythagorean Regulation of Cell Phone Contracts—A study of automatically renewable long/term contracts across jurisdictions; forthcoming.
