Theresa May Faces Backlash Over Energy Price Cap

Theresa May will press ahead with a promise to cap energy prices for 17 million households despite warnings that the move could force up bills for other customers. The prime minister said that she expected the price cap to save families on poor-value tariffs as much as £100 a year. Introducing a cash limit is the most radical of options that had been under consideration by the government. It is arguably the most significant intervention in the market since privatisation. —The Times, 9 May 2017

Theresa May’s election manifesto, we are told, will pledge a cap on our bills from those rapacious energy companies, forcing them to reduce their charges by an average £100 a year. This is supposed to be a vote winner. But what it overlooks is the picture recently revealed by the Office of Budget Responsibility (OBR), projecting the soaring cost over the next five years of all those “green” levies and taxes created to promote the Government’s drive to “decarbonise” our economy. Saving £100 a year by paying £558 may not sound quite the bargain of the century. But at least we shall have the comfort of knowing that we are helping to save the planet from that global warming so much in evidence lately, by meeting our obligations under the insane Climate Change Act, which no party in the next Parliament has any intention of repealing. — Christopher Booker, The Sunday Telegraph, 30 April 2017

Theresa May has admitted her policy of capping energy prices may not be “Conservative” but said supporting working people was more important than “ideology”. The Prime Minister has faced criticism from the country’s biggest energy firms – as well as some within her own party – for pledging to bring in a policy that goes against traditional Tory free market values. Lord Lawson, the former Conservative chancellor, is among those who oppose the idea of a price cap, describing the policy as “crazy”. —The Daily Telegraph, 10 May 2017

The Prime Minister is clearly right to be concerned about the cost of energy to households, but in seeking to put price caps on energy suppliers she has chosen the wrong target, energy retailers, and the wrong instrument, price caps. Her own government policies are much more of a problem, and much more readily addressed. Price caps will almost certainly prove to be counterproductive, causing higher prices later in the cycle as the result of damage to investment signals. It would be both simpler and more effective, and much more beneficial to consumers, to abandon all extravagant and ineffective subsidy spending on renewable energy that is driving prices up for years to come. —Global Warming Policy Forum, 10 May 2017

Proposals to impose price caps on energy bills highlight the mess Britain’s energy policy has got into. For some time, politicians of all parties have been imposing policies that force up energy costs. Now they want to cut the energy bills that have been driven higher by their own policies. The only good argument for price caps is the Leninist principle of “the worse, the better,” as the move brings forward the day when the entire policy collapses. –Rupert Darwall, CapX, 10 May 2017

The proposed cap on the standard tariff is, for now, a modest affair. But in accepting the principle, mid-election, that governments should set prices, even in one area, the Conservatives have crossed too far into deeply dangerous territory. The reason the Tories have made this move now is obvious. An energy prize freeze unveiled by Labour in 2015 was popular. The Tories are pushing to convert voters deep in Labour territory, and this is designed to appeal on the basis that it sounds like sticking up for consumers. This is economic illiteracy and a bad basis on which to make policy, because voters told by a prime minister that one set of prices can be capped may ask: why not more? Look where that got the country in the 1970s. –Iain Martin, The Times, 10 May 2017