The government’s plan to introduce a price cap on energy prices this winter has obviously caused a lot of consternation amongst the energy suppliers whose profit margins will suffer as a result. Winter is the coldest and darkest time of the year and thus people use far more artificial light as well as a lot more energy keeping their homes warm. It is peak season for energy suppliers, so capping the amount they can charge was always going to be met with some hostility from the industry.
However, not all energy companies see the price cap as an infringement upon their right to make as much money as possible off their customers.
Not All Energy Bosses Are Against Price Cap
The founder and Managing Director of Ovo Energy, Stephen Fitzpatrick, has spoken publically of his endorsement for the price cap proposal, even using his own company’s website to outline the reasons he believed a price cap was a good idea.
Mr Fitzpatrick said that he believed the Conservative Party’s commitment to introduce new legislation that protected customers on standard variable tariffs was a bold and ambitious move.
“Eighteen years of light-touch regulation has not delivered an energy market that works for most customers,” he declared. “The standard variable tariff cap will not harm consumers or competition, but act as a catalyst for innovation and efficiency amongst suppliers. It will be painful for some companies, especially those currently taking advantage of customer disengagement, but it will offer consumers a safety net, protecting them from some of the worst practices of the industry whilst still allowing innovative suppliers to compete.”
Customer Disengagement Mistaken for Loyalty
That ‘customer disengagement’ is one of the primary motivators for the government’s intervention. Research conducted by the government’s Competition and Markets Authority revealed that so-called ‘loyal customers’ were being overcharged by a collective £1.4 billion per year.
While many of the people in this group are possibly intentionally staying with one energy supplier for what they understand to be good reasons, a great many more are likely not loyal at all, but simply disengaged and unaware of the possibilities of switching energy suppliers and getting a less expensive rate. The price cap will protect these people the most, among whom are some of the country’s most vulnerable energy consumers such as the elderly.
Price Cap Proposal ‘Entirely Different’ From Price Freeze Principle
Mr Fitzpatrick also pointed out the difference between the price cap and a price freeze. He continued, “The policy of the [Standard Variable Tariff] price cap is entirely different from the price freeze principle. It will set a ceiling on retail prices based on underlying market conditions, allowing headroom for efficient companies to operate profitably.
“It is the most efficient way to ensure customers are treated fairly. This policy will lead to lower average prices across the industry, saving customers hundreds of millions of pounds.”
If you would like more information about the different energy suppliers available to you and how you can make the switch to a better deal, get in touch with Business Save’s team of highly experienced energy experts who can advise you on the best way to reduce your energy bills this winter.