Share prices for two of Britain’s biggest energy companies have fallen in the wake of the Conservative party’s pledge to cap energy bills. Shares in British Gas owner Centrica, the UK’s largest energy supplier, fell 4.2%, while SSE shares fell 3.2%. The pair’s share prices had dipped by similar amounts after Ed Miliband promised an energy price freeze in 2013. Ministers said on Sunday that the cap on standard variable tariffs, which more than two-thirds of households pay, would save the average family around £100 a year. SSE has more customers on standard tariffs than any of the big six energy companies, with 91% or 3.8 million, making it the most exposed to the Tory plan. British Gas is the only one of the large suppliers to have not hiked prices in the recent flurry of tariff rises, although analysts expect the cap will dent its parent company’s earnings before by £300m. Experts at Jefferies, the stockbroker, said that if the company offset the pain by making its fixed deals more expensive – as seems likely across the industry – it would reduce the loss to £150m. Several analysts said a price cap could hit the ability of Centrica to pay a dividend to shareholders. The bank Berenberg calculated that a £100 annual cut for the 17m households on standard variable tariffs would cost energy suppliers at least £1.7bn a year, with the big six bearing the brunt of the losses. Iain Conn, Centrica’s chief executive, reacted to the the Tory campaign pledge by arguing it would hinder rather than help consumers. “Price regulation will result in reduced competition and choice, stifle innovation and potentially impact customer service,” he said. ScottishPower criticised the policy and called for standard variable tariffs to be abolished and replaced with something more akin to an insurance product, fixed for a certain period of time after which it would need to be renewed. The company said a cap would stop competition. A spokesman for SSE said: “while we will work with an open mind with government on any reforms, we would always caution about the potential unintended consequences of any intervention in what is a rapidly changing and increasingly competitive market.” The Tory policy goes against the advice of the Competition and Markets Authority, which concluded in a review last year that a cap would “run excessive risks of undermining the competitive process, likely resulting in worse outcomes for customers in the long run”. But the founder of one of the market’s smaller suppliers said the big players had only themselves to blame, by overcharging loyal customers. “We hear the big six bleating that they barely make a profit. That’s not because their prices are competitive, it’s because they’re bloated and inefficient – and their customers pay the price,” said Greg Jackson of Octopus Energy. Miliband joked on Sunday that the interventionist stance taken by the Conservatives would prompt criticism from newspapers that had attacked his pledge four years ago. •This article was amended on 25 April 2017 to include the correct name for the competition watchdog, the Competition and Markets Authority.
The UK’s ruling Conservative Party has promised to cap energy costs, causing share prices in Centrica, which owns British Gas, to fall 4.2%, whilst shares in SSE fell 3.2%. Both companies saw similar share price drops in 2013 when former Labour leader Ed Miliband pledged to introduce an energy price freeze. Ministers have said that a cap on standard variable tariffs, paid by over two-thirds of households, would save families £100 ($128) on average each year. “Energy bills are rising faster than wages and inflation is running at double the rate of wage growth,” says John Hawksworth, chief economist for PwC.