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Energy explained

In support of an energy price cap: where we go from here

The Energy Price Cap Bill is getting closer to implementation. Which is great - we support the cap. Find out more about the legislation, and how Bulb thinks it could be improved.

By Hayden Wood, Co-founder of Bulb

The proposed Energy Price Cap Bill had its second reading in parliament this week. Which means it’s on the way to becoming law. As vocal supporters of the Price Cap, we’re really pleased about this. But there’s more we could do to improve the legislation. As is often the case, the devil is in the detail. In this post, we look at where we’ve got to with the bill and suggest three ways to improve it.

Progress so far

We’re right behind the price cap bill. The cap will protect customers on rip-off tariffs, while at the same time creating more competition and transparency in the energy market. When the idea was proposed, we wrote a blog post to show our support. And we’re pleased to see things moving quickly. Too many people, for far too long, have been paying over the odds for their energy. It’s time to act. And it’s great to see the Government doing what it can to make sure the cap is in place in time for winter. 

While speed is good, it’s important to get the bill right. We think there are three ways of improving the bill:

1) Let’s close the green loophole

The current bill allows the regulator, Ofgem, to exclude from the cap any tariff that it considers to support the production of renewable gas or electricity. We see no reason why there needs to be an exemption for green tariffs in the price cap. Bulb is living proof that suppliers can offer energy that is both green and cheap. Today, Bulb’s 100% green electricity tariff is over £250 cheaper per year than standard dirty Big Six plans.

We’re concerned that this exemption creates a green loophole that could be exploited by unscrupulous suppliers to keep charging people unfair prices. The Chief Executive of Ofgem has agreed, pointing out that some suppliers “may try to game” this exemption. And it perpetuates the unhelpful myth that green energy has to cost more. As Claire Perry, Minister for Energy and Clean Growth, said in parliament this week: "customers should not have to overpay to be on a green tariff. We are now buying subsidy-free offshore wind and I opened the first subsidy-free solar farm only last year."

During the committee proceedings, the legislation was tightened up in response to these concerns. In its current form, the bill requires consumers to actively choose a green tariff in order for it to be exempted from the cap. But why not go the whole hog? We’d like MPs to vote to scrap the green loophole altogether.

2) Let’s make the cap absolute

The legislation doesn’t currently define whether the cap will be absolute or relative. As a small supplier, a relative cap would help us to grow more quickly. Despite this, we support an absolute cap. Without one, the 11 million homes currently on rip-off standard tariffs won’t be guaranteed a price saving by winter this year. Under a relative cap, unscrupulous suppliers could move their cheaper tariff closer in price to their standard tariff to comply. The end result would be all of their customers paying more for their energy. Only an absolute cap will protect customers from rip-off rates. And it’ll increase the incentive for suppliers to reduce costs and stay competitive. Which is what we want for the market. 

3) Let’s make the cap permanent

We’d also like the cap to be made permanent, rather than time-limited. With Ofgem reviewing the rate at which the cap is set at least every 6 months, we see no reason for it not to be. Unscrupulous, larger suppliers have shown for too long that they will not take action to cut bills for customers. The price you pay for energy should always reflect the cost. A permanent cap will make sure it does.

As always, we’d love to know your thoughts on this. Stop by the Bulb Community and let us know what you think.