On the release of a draft bill which would give Ofgem full power to impose a temporary energy price cap on standard variable tariffs until at least 2020, Martin Lewis, founder of MoneySavingExpert.com and cheapenergyclub.com, which now has over 3 million members, said:
“A price cap done wrong can do more harm than good. Some Tory MPs had been lobbying for a ‘relative’ price cap – which means a firm's most expensive price can only be a set percentage more than the cheapest. That’s self-defeating – it means they’ll just withdraw cheap deals – so I’m happy to see that if we are going to have a cap it is to be an absolute cap which doesn’t create that problem.
“Yet ultimately a price cap is a halfway house. Politicians have to make their minds up. Do they see competition and switching as the solution, or do they want to regulate prices? For switching to work you need big price differentials – so some will have to pay more than others. A price cap narrows the differential.Those who did switch may end up dis-incentivised to do so. Those who don’t switch will save some money, but not as much as if they embraced the competitive market or all prices were regulated.
“If we are to stick with competition, what we need to do is decide who is and who isn’t an acceptable victim of competition.If I – as someone who is web-savvy, affluent and financially informed – chooses not to switch, that’s my problem.If a struggling 90-year-old granny who’s not on the web is too scared to switch, it needs fixing.A price cap however is an indiscriminate solution, which isn’t ideal.
“For this winter though, forget the price cap. Right now someone on a big 6 standard tariff with typical usage pays £1,130/yr on average, while the cheapest tariffs are £820/yr – same gas, same electricity, same safety. Everyone should check if they're on the best deal now. Too many already choose between heating and eating.”
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About Martin Lewis: Martin Lewis OBE, Money Saving Expert, is the journalist and consumer campaigner who created MoneySavingExpert.com and is now the site’s Executive Chair. Martin also founded and chairs the Money and Mental Health Policy Institute charity.
He’s the UK’s most-googled man, Citizens Advice’s Consumer Champion of the Year, and has spearheaded major financial justice campaigns including bank charges reclaiming (over seven million template letters downloaded), PPI reclaiming (over six million) and a successful large-scale campaign to get financial education in schools. He has his own prime-time ITV programme, The Martin Lewis Money Show, as well as a range of other regular media slots. He was appointed OBE in the Queen’s Birthday Honours in June 2014.
About MoneySavingExpert.com: MoneySavingExpert.com is dedicated to cutting consumers’ bills and fighting their corner. The free-to-use consumer finance help resource aims to show people how to save money on anything and everything, and campaigns for financial justice. It was set up in 2003 for just £100, and its free-to-use, ethical stance quickly made it the UK’s biggest independent money website, according to internet ranking site Alexa.com, and the number one ‘Business and Finance – Business Information’ site, according to Hitwise. It has more than 12 million people opted-in to receive the weekly MSE’s Money Tips email, and more than 16 million unique monthly site users who visit more than 28 million times a month. In September 2012, it joined the MoneySupermarket.com Group PLC.