Bloomberg News

Cameron to Make U.K. Energy Suppliers Charge Lowest Tariff

October 17, 2012

U.K. Prime Minister David Cameron said his government will change the law to tackle rising energy bills by forcing companies to charge each customer at the lowest rate for their type of use.

“I can announce we will be legislating so that energy companies have to give the lowest tariff to their customers,” Cameron told lawmakers in the House of Commons in London today. His office confirmed afterward that the measure will be in the Energy Bill, due before the end of this year.

The proposal wasn’t contained in the draft Energy Bill published earlier this year, which focused on creating incentives for generating companies to replace and increase capacity.

Cameron’s statement came after announcements over the past week of price increases by energy companies. Centrica Plc (CNA)’s British Gas, the biggest natural-gas and power supplier to U.K. homes, said it would raise prices for both gas and electricity by an average of 6 percent, and RWE Npower Plc said it will boost rates for power by an average 9.1 percent and gas 8.8 percent.

Cameron’s commitment, given off the cuff in an answer during his weekly prime minister’s questions session in Parliament, was a surprise to aides, according to two who spoke afterward. The government had been looking at how it could help consumers short of full-scale regulation, said the aides, who were not authorized to speak publicly on this issue.

‘Very Concerned’

“You will have to wait for the energy bill to get the details, but we will legislate to get the lowest tariff,” Cameron’s spokesman, Steve Field, told reporters in London later. “We’re very concerned about the cost of living.”

The squeeze on household budgets caused in part by rising energy prices has been a bigger drag on the economy than government budget cuts, the Office for Budget Responsibility, Britain’s fiscal watchdog, said in a report published yesterday.

Field said that only a minority of consumers were taking advantage of the possibility of switching providers to find the lowest gas and electricity prices. “We need to place more obligation on companies,” he said. “At the moment, everything is down to the consumer. We feel we need to go further.”

“Energy companies should make sure they’re only adding to their bills the absolute minimum they need to add to continue investing in our energy supply,” Chancellor of the Exchequer George Osborne told ITV News last week. “I would urge those energy companies to look again at any increases to see if they are absolutely necessary.”

Pollution Rules

Oil and coal-fired power plants with 14 percent of Britain’s capacity are due to retire from service by 2015, partly because of tighter pollution rules and partly because some of the facilities are nearing the end of their intended life. The government also is seeking to encourage new nuclear stations to replace the current plants that will age out of the system by 2030.

The opposition Labour Party called on the government to create a new energy watchdog with powers to force providers to pass on price cuts to the consumer.

“The cheapest deal in an uncompetitive market will still not be a good deal for the public unless we completely overhaul our energy market to break the dominance of the big six energy companies,” Labour’s energy spokeswoman, Caroline Flint, said in an e-mailed statement. “Until we see real action from the government, the prime minister’s warm words in the House of Commons will be cold comfort to millions of families worried about how they will pay their energy bills this winter.”

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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