British Prime Minister Theresa May vowed on Tuesday to introduce a cap on domestic energy prices that would cut tariffs for around 17 million families if she is re-elected on June 8. Energy bills have doubled in Britain over the past decade to about 1,200 pounds ($1,553.40) a year, angering consumers who face rising inflation and muted wage growth, and drawing the ire of politicians ahead of the national election. According to the Sun newspaper, May will order the energy regulator Ofgem to cap the maximum costs of standard variable tariffs, the package used by two thirds of customers in Britain.
May, whose ruling Conservative Party is around 20 points ahead of the opposition Labour Party in opinion polls, said she expected the move to save families on poor value tariffs as much as 100 pounds a year. “It will protect around 17 million families on standard variable tariffs from being exploited with sudden and unjustified increases in bills,” May wrote in the Sun.
Share prices in Centrica, which owns household energy supplier British Gas, and SSE, have fallen this year since the ruling Conservative Party indicated its intention to set a price cap. Centrica shares are down 14 percent. Centrica Chief Executive Iain Conn said last month that May’s plan to cap energy prices suggests some in her government do not believe in free markets at a time when it is pinning its post-Brexit hopes on free trade.
May last year praised free markets and free trade in a speech to party activists but also said that she would be prepared to intervene where markets were dysfunctional or where companies were exploiting the failures of the market. May’s government has previously called for more competition in a sector dominated by the big six providers of Centrica, SSE, Scottish Power, Npower, E.ON and EDF.
The energy industry has argued that a price cap will wipe out competition and force companies to increase the cost of their lowest tariffs. The policy echoes a pledge made by the opposition Labour party ahead of the 2015 election. Their plans for a cap on price hikes were lambasted at the time by the Conservatives who accused the then Labour leader Ed Miliband of wanting to live in a “Marxist universe”.