British Gas loses customers in price cap row

Posted May 10, 2017

The Conservative Party's general election manifesto is expected to include an intervention measure in the United Kingdom energy supply market, with a price cap touted as one option. "I expect (this) to save families on poor value tariffs as much as 100 pounds".

Earlier this week, before May's announcement, The Share Centre investment research analyst Graham Spooner noted that the firm had come under political pressure to reduce prices and had been in dialogue with the United Kingdom government on alternative ways to improve the domestic energy market.

As a result, last month Ofgem, Britain's energy regulator, introduced a temporary price cap on pre-paid energy meters, which could save consumers approximately £80 a year.

According to a Government-backed study, customers have been forced to pay £1.4bn a year in "excessive prices", but the CMA stopped short of imposing a cap for fear of stifling the competition.

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.

The Confederation of British Industry said it was too soon to rush into such a policy after a major review of the energy market - and even Greenpeace said it was not a full solution.

Efficiency savings of £250m expected in addition to 2016 savings of £384m, as part of the Group's £750m per annum cost efficiency programme.

Iain Conn, the chief executive of Centrica, said such a move would avoid people on low incomes being "disproportionately impacted" by policies such as funding the roll-out of smart meters, which are created to help households better monitor their energy usage.

The group is likely to be hardest hit by the price plan and its share price is already half what it was in 2013 before the threat of a cap on prices was first raised by Labour party leader Ed Miliband.

The energy company is also on track to cut 1,500 jobs and have adjusted operating cash flow of more than GBP2 billion this year, it said.

Centrica came under fire last month for handing Conn a pay rise of almost 40 per cent for 2016.

In February, Centrica's British Gas unit extended a price freeze until August.

"Long-term investors will be familiar with the tricks the weather and energy prices can play on Centrica's profits".

Shadow Business Secretary Rebecca Long-Bailey added: "When the Tories say they'll "cap" bills, the question they need to answer is whether they can guarantee bills won't go up for people next year - that's the real test".