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Price cap 'will shake up energy market'

May 03
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Price cap 'will shake up energy market'

A cap on energy prices - as recently proposed by the Conservative party ahead of the snap general election set to take place on June 8th - could have major repercussions for the industry.

That's according to KPMG, which commented on some of the consequences consultants working in the sector might have to prepare for if the manifesto pledge comes to fruition.

The Tory party has said that energy bills for millions of consumers will be capped, potentially saving each household around £100 a year.

Speaking to the ITV Peston on Sunday programme, work and pensions secretary Damian Green said the proposed policy was a response to the fact that some customers feel gas and electricity providers are taking advantage of them.

However, Iain Conn, chief executive of British Gas' parent company Centrica, warned that the measure could "reduce competition and choice, stifle innovation and potentially impact customer service".

Simon Virley, UK head of power and utilities at KPMG, pointed out that a cap on prices would spell the end of a philosophy that has defined energy policy for nearly 30 years - that healthy competition is the best way to serve customers and keep prices under control.

He added: "Ironically, it comes at a time when there are a record number of suppliers in the market.

"This change would have major implications for the way the energy market works. We have already seen the share prices of some of the Big Six energy suppliers take a hit."

In the immediate aftermath of the Conservative party's manifesto pledge, shares in Centrica dropped by 3.5 per cent and SSE experienced a 1.9 per cent drop in its share price.

If the cap is enforced, it would relate to providers' standard variable tariffs, which more than two-thirds of British households currently pay.

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Image: iStock/yocamon

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